New York is facing a $6 billion budget deficit, mainly due to an increase in spending on Medicaid, and Governor Andrew Cuomo and state lawmakers are trying to come up with ideas on how to close it. One idea gaining support among some Democrats in the legislature is reinstating a decades old stock transfer tax changed during the Reagan era that its sponsor says could net the state billions of dollars a year.
Assemblyman Phil Steck says his bill to reinstate a .25 percent tax on transfers of stocks and bonds in the financial markets is nothing new.
“It’s a sales tax,” Steck said. “It was actually brought in by the Republican Party in 1905 because Republicans don’t like income taxes, they prefer sales taxes.”
It was changed during President Ronald Reagan’s time in office in the 1980s.
“There was artificial exuberance about all the wonderful things Wall Street was going to do for us,” said Steck, who credits New York’s financial industry for revitalizing New York City. But he says “the benefits for the rest of the state have not been there.”
“This would spread it out,” said Steck.
In New York law, the tax is technically still on the books, but it has been rebated back to brokers. Steck believes reviving the tax could bring in $13 billion a year. He says that money could be used to upgrade infrastructure — fixing roads and bridges upstate, and the subways and commuter trains downstate.
While the bulk of the tax would fall on major millionaire and billionaire players in the stock market, Steck says an average middle class New Yorker with a self directed retirement account would likely pay an average of $50 more per year.
Steck says the tax could also cut down on what is known as “churning,” where money is moved around in the financial industry with no increase in economic productivity.
Steck is a Democrat from the Capital Region and a supporter of Vermont Senator and Presidential Candidate Bernie Sanders. Steck was one of the few Democratic elected officials in New York to be a Sanders delegate in 2016, and he hopes to be one again in 2020.
Senator Sanders proposed reinstating a federal version of the stock transfer tax in 2016, and supports it again as part of his second run for the presidency.
Business groups are against the proposal, saying it will harm Wall Street and the economy.
Steck is circulating the bill and has gained the support of two long time prominent Assemblymember, Dick Gottfried, who chairs the Health Committee, and Joe Lentol, chair of the Codes Committee. In the Senate, Senator James Sanders, Chair of the Committee on Banks, is a supporter.
A spokesman for Governor Andrew Cuomo’s budget office, Freeman Klopott, says the governor believes the budget gap can be closed without raising or imposing any new any new taxes.
“While Medicaid spending is projected to grow at almost 6 percent annually nationally, we are developing a plan to be introduced in January that will once again limit New York State’s Medicaid spending growth and continue high quality care for 6 million New Yorkers without raising taxes to cover the cost,” said Klopott.