By Jim Toes, President and CEO, STA
As New York State grapples with budget challenges, Assemblyman Phil Steck and Senator James Sanders earlier today proposed bills (A3353/S1406) to reinstate the long-dormant New York Stock Transfer Tax (STT), a financial transaction tax (FTT) on stock trades. Proponents claim this tax, in place since 1905 but fully rebated since 1981, offers a low-rate, broad-based solution to raise billions for infrastructure and social programs with minimal market disruption. Opponents have argued successfully that taxes on stock transactions harm end investors, destabilize New York’s financial markets, and fail to deliver promised revenue.
We urge New Yorkers to contact their state representatives to oppose this flawed proposal which ignores the realities of modern finance.
Steck and Sanders, argue the STT’s low rate—described as mere micro-cents per trade—makes it a harmless revenue tool and ensures traders and financial firms won’t alter their behavior. History, however, tells a different story. Taxes rarely stay “tiny.” There are countless examples of new fares, tolls and taxes implemented with low initial rates that experience rate hikes due to political pressures to address budget gaps. When New York first imposed the STT in 1905, its rate was modest, yet it grew over time until rebates were introduced to prevent market flight.
Financial firms are not tethered to New York by sentiment but by profitability and shareholder obligations. If the STT is reinstated, firms can and will relocate trading operations to avoid it—just as over-the-counter market makers fled New York for Jersey City in the 1960s when a similar tax was imposed.
The ripple effects would hit ordinary investors. Brokers and market makers have every right to pass the tax onto investors who initiate the trade. Mutual funds, ETFs, and pension plans—relied upon by millions of New Yorkers—will face reduced returns as transaction costs mount. Sweden’s 1980s FTT experiment saw trading volumes plummet and capital flee; France and Italy’s more recent FTTs similarly underperformed revenue goals while harming markets. New York, the world’s financial capital, cannot afford such a misstep.
Likely Responses from Other States
Allowing New York to tax national and global stock trades grants one state excessive control, undermining the integrity of our interconnected financial markets. Should a single state profit at the expense of investors nationwide or negatively impact a national market system by adjusting its tax rate? Absolutely not. Such a tax risks fragmenting markets, driving trading—and thousands of supporting jobs—to jurisdictions like Texas, where no such tax exists and a new exchange is emerging
Steck and Sanders estimate the STT could raise $4 billion to $14 billion annually, a tempting figure for a state facing a $17 billion budget gap. Yet these projections ignore secondary reactions. If firms relocate trading to avoid the tax, revenue will fall far short, as seen in other jurisdictions.
Moreover, taxing trades by out-of-state investors raises fairness and legal questions. Why should a retiree in Texas trading 10 shares of Apple pay a New York tax? Governors in other states, especially those with “no new taxes” platforms, will balk at their residents subsidizing New York’s budget.
This could spark a race to the bottom, with other states imposing their own STTs, fragmenting markets and eroding investor confidence. Even if New York collects some revenue, out-of-state challenges could tie up funds in court, as seen with interstate tax disputes today. The STT’s revenue is neither guaranteed nor stable—it’s a gamble that risks New York’s economic engine, which supports one million securities jobs and 18% of state tax revenue.
Reinstating the New York Stock Transfer Tax is a shortsighted proposal that burdens everyday investors, threatens jobs, and undermines the state’s financial dominance. We urge Governor Hochul, Assemblyman Steck, and Senator Sanders to abandon this plan and seek revenue solutions that don’t jeopardize New York’s economic future.
