The New Jersey Chamber of Commerce opposes legislation (S-2902/A-4402) which would impose a new tax on financial transactions, such as electronic stock trades, that flow through major data centers in New Jersey.
Simply put, the tax could backfire on New Jersey. The mere discussion of this tax has caused several stock exchanges to begin exploring moving their data centers out of New Jersey – to states that don’t impose such a tax. Last month, the New York Stock Exchange, which has a data center in Mahwah, N.J., said it ran one of its exchanges from a back-up data center in Chicago to demonstrate its readiness to move out of New Jersey. Two other exchange operators, Nasdaq Inc. and Cboe Global Markets Inc., also indicated that they would leave New Jersey over the tax. If New Jersey loses data centers, the state would actually be looking at less revenue and less jobs.
We have been working in conjunction with the U.S. Chamber of Commerce to produce evidence that this tax is damaging, and we have presented this report to the bill’s sponsors.
This tax proposal contributes to the state’s declining competitive position in the business community. In the past month alone, we have seen an imposition of a so-called millionaires tax, which impacts small businesses that file taxes as S-corporations; and we have seen an increase of a surcharge on the state’s Corporation Business Tax (CBT).
Now the state is setting its sights on the financial services industry, which contributes nearly $1.4 billion in New Jersey state and local taxes, and employs 38,000 people in New Jersey, according to a recent report conducted by EY.
Gov. Phil Murphy said the proposed tax on electronic transactions would be temporary and it would eventually phase out.
That’s exactly what they told us about the Corporation Business Tax surcharge. It will phase out, they said. And what are they doing this year? They are extending it.
Why should we feel better when we are told this would be temporary?
There is nothing here to feel good about.
While we recognize that New Jersey is seeking new sources of funding as a result of the negative financial impact of the COVID-19 pandemic, imposing a financial transaction tax is not the solution.