Lawmakers doubt NYSE would leave NJ if ‘Wall Street tax’ passes (updated)

The chief Assembly sponsor of a bill to tax Wall Street transactions moving through New Jersey cast skepticism that the New York Stock Exchange and other major financial institutions would move out of the state should the proposal be approved.

“You can run but you can’t hide,” Assemblyman John McKeon, D-27th District, said during a Monday hearing for the controversial legislation. “Are they all going to go away? No, they don’t have to. You didn’t see anybody have to go chase them” to Chicago.

McKeon showed skepticism that major financial institutions would actually follow through on threats to move operations to their Chicago servers, pointing to similar legislation moving through Illinois. The NYSE meanwhile has been in talks with Texas Gov. Greg Abbott, a Republican, to relocate its servers to Dallas should New Jersey enact the tax.

“To think that one one-hundredth of a cent [sic] would be something to cause the exchange to move, because that no longer makes them competitive as it relates to the exchanging taking place, is extraordinary,” he added.

The bill is being sponsored by Senate President Stephen Sweeney, D-3rd District, and has the support of Gov. Phil Murphy.

“They expressed their concerns,” Murphy said when asked at a press briefing later that day. “I can’t read their minds. But the fact is that we are at an hour of need. This is not a forever and an always. Our side of the argument is reasonable.”

Under amendments unveiled Monday to Assembly Bill 4402, the state would impose a tax rate of $0.0001 for every transaction that goes through New Jersey, rather than the originally proposed $0.0025. Sweeney said last week that the originally proposed tax rate was “way too high,” but he too was skeptical the NYSE would permanently relocate to Chicago.

“It is time for Wall Street to share in the sacrifices that the residents of New Jersey have made this past year,” the Senate President said last week.

The amendments call for a two-year sunset, rather than letting the tax continue indefinitely. That would generate $500 million a year – or $1 billion during the lifetime of the tax – according to McKeon.

“I won’t go into how much money the five major banks are making through the second quarter of this year while everybody else is hurting, but it’s billions,” McKeon said during a Monday morning hearing at the Assembly Financial Institutions and Insurance Committee.

“I’m asking this industry to be part of the solution for what’s the most difficult time,” he said, amid the COVID-19 pandemic, which has triggered mass business closure and put more than 1.6 million New Jerseyans out of work.

The proposed tax rate, both in its original and current form, has met widespread opposition from major financial institutions and the New York Stock Exchange, many of whom testified on Monday against the bill—even with the new amendments.

I’m asking this industry to be part of the solution for what’s the most difficult time.
— Assembly Bill 4402 sponsor Assemblyman John McKeon

The NYSE’s most well-known data center is a 400,000-square-foot facility in Mahwah.

To flex its ability to move to Chicago, the NYSE moved operations to its servers there for several days at the end of September.

“This is not contingency planning that we set out to do, but it appears to be necessary,” said Hope Jarkowski, co-head of government affairs at NYSE’s parent company Intercontinental Exchange Inc. “We are sympathetic to the financial pressure that New Jersey is facing, but that is not the way to address it.”

Tom Bracken, president and chief executive officer of the New Jersey Chamber of Commerce, was widely critical of McKeon’s outright skepticism, saying the Assemblyman’s response boiled down to “you’re bluffing, you’re not going to leave and we will move forward.”

As for the proposed two-year sunset, Bracken pointed out that the heightened corporate business tax rate “was supposed to be temporary,” but “it’s anything but that today.” The 2021 state budget Murphy signed in September extended that for another four years.

“It’s the wrong way to fix your budget, and it will simply be passed onto investors and retirees,” said Terry Campbell, vice president of government relations at Nasdaq.

Other lawmakers – Democrats and Republicans – were still wary about the threats to move to Chicago.

“I think actually they will go elsewhere because the markets are required to find the best opportunity, the best trading opportunity,” Assemblyman Roy Freiman, D-16th District, said on Monday.

Editor’s Note: This story was updated at 2:37 p.m. EST on Oct. 19, 2020, to include remarks from Gov. Phil Murphy. It was updated at 4:56 p.m. EST on Oct. 19, 2020, to correct the size of NYSE’s Mahwah facility from 400 square feet to 400,000 square feet.