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Michael Miller

Viewpoint

By Michael Miller
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How Wall Street Can Save Long Island

If you buy ten dollars worth of school supplies for your kid, you’re going to pay between 70 cents and 88.75 cents in sales tax, depending on which New York county you shop in. Investors and speculators purchase trillions of dollars in stocks each year in this state, and pay no tax.

New York State has had a stock transfer tax on its books since before the First World War. Currently, the state charges between 1.25 cents and five cents on every share of stock sold or transferred, depending on the stock’s value, up to $350 per sale. Individuals pay the tax in the form of tax stamps that are purchased and attached to the stock (large brokerages and companies can pay the tax without dealing with the stamps). For exactly three decades, those who pay the stock transfer tax have been entitled to a 100 percent rebate. Just fill out the one-page form.

Governor Carey pushed to eliminate the stock transfer tax in 1981. He was just one in a century-long series of political leaders to fall for the New York Stock Exchange’s periodic, totally unrealistic threat to move to New Jersey or Alaska or Mars unless they are given huge tax advantages. Only a technicality (the funds from the tax were specifically pledged to back New York City municipal bonds) prevented the total elimination of the stock transfer tax.

In 1981, the state gave up $580 million, which was doable at the time. By 2001, lost revenues from the returned stock transfer tax had reached $7.63 billion. In 2010, New York lost $14.471 billion. That’s over fourteen billion dollars, in case you thought it was a misprint. That’s actually down from a height of $16.313 billion in 2008, the year Wall Street ran into a little bit of trouble, and took out trillions of dollars of American middle class wealth with it.

If we rebated only part of the stock transfer tax, it would go a long way to getting us out of our current fiscal hole. You can even protect legitimate small investors and allow a certain amount in transfers per individual in any given year to remain tax free.

If we went the full distance, and retained all $14 billion, it would be enough to plug any budget deficit, bail out our basket case municipalities, cut income and property taxes for many individuals and businesses which pay too much now, and create new revenue streams to back bond issues to start rebuilding some of the important things that are starting to fall apart. Of course, any change in taxation changes behavior to some extent, and the final real-life revenue would likely be somewhat less than $14 billion, because some volume from speculation and casual trading would decrease.

It would be an added benefit if a transfer tax could cool off some of the automated high-frequency trading by supercomputers, which sometimes hold stocks for only a few seconds or less. Flash trading, seen by many as an unfair advantage for some large traders and investment houses, caused an infamous “flash crash” last May 6th in which the Dow Jones average fell by 700 points in a few minutes.

Meanwhile, a growing number of economic experts are referring to state and local budget cutbacks as a “key macro risk” to the economy. The meaning of that phrase is just as unsettling as it sounds.

Between 1990 and 2007, New York State’s Gross Domestic Product (the market value of all goods and services produced) rose 48.6 percent, up to $1.022 trillion, according to the Fiscal Policy Institute. During that time, median family income within the state rose only 7.4 percent (the annual Wall Street salary, including bonuses, went up 111.8 percent). The average earnings for full-time, year-round workers with at least a Bachelor’s degree, age 25 to 34, went down 13.7 percent ($52,000 average income in 2007, from just over $60,000 in 1990).

We keep hearing about how some of us have to sacrifice. I agree.

This generation of adult Americans is at a turning point. We can lose nearly everything built for us by those that came before if we make the wrong choices. It’s time to choose.

 

 

Michael Miller is a freelance writer, designer and strategic consultant who has worked in state and local government. Email: millercolumn@optimum.net