Last summer the New Jersey legislature introduced a bill that would impose a Financial Transaction Tax (FTT) on persons or entities that process 10,000 or more financial transactions through electronic infrastructure located in New Jersey during the calendar year. The tax would be a quarter of a cent ($0.0025) per financial transaction processed in the state and imposed on processors.
This legislation would increase the cost of doing business for many firms processing significant financial transactions. As the tax would likely be passed along to consumers, critics have voiced their concern that this will potentially drive businesses and jobs out of the state. Governor Murphy backed off of the proposal days after the Wall Street Journal reported that the NYSE was considering to move its data center out of New Jersey if the tax was enacted. Even after the FTT was eliminated out of last year’s budget, the state’s Assembly still held hearings on the matter as top Democrats in New Jersey are still eying the tax. It also has been reported that Governor Murphy still likes the idea of the tax.
They’ve got their concerns, naturally, but I think this is something worthy of consideration, and we’ve spent a lot of time working on it, as have our legislative colleagues. It’s tricky. We didn’t score it in the budget because it was tricky, and again the spirit that we’ve tried to express is this is not forever and for always.
Under the bill, the tax would apply to transactions involving financial securities such as futures contracts, options contracts, futures option contracts, swap contracts, credit default swap contracts, derivatives, or stock shares. The FTT could result in a financial instrument being taxed multiple times. As the same instrument is traded, it may be taxed over and over.
An FTT is akin to a consumption tax on investors, and would impact savers investing for retirement, college, or a down payment on a house. Although this tax proposal may be in its infancy, it is very likely this will be part of next year’s budget discussions over the next many months.
contact Withum’s State and Local Tax Group for a deeper discussion.