The Garden State’s proposed financial transaction tax has not been enacted yet, and a recent study suggests that the measure could cost retirement plans in the state billions of dollars.
“A Case Study on the Effects of a Financial Transaction Tax on Savers in New Jersey,” an October 2020 study by Gourprabh for the University of California, Los Angeles, for the Modern Markets Initiative, called the costs that an FTT would impose on millions of people in New Jersey “staggering.”
The study says that the impacts of the proposed tax would include the following:
|
Group |
Impact of FTT on trading with 10 basis point equities, 10 basis points bonds, 10 basis point derivatives |
Impact of FTT on trading with 50 basis point equities, 10 basis points bonds, 0.5 basis point derivatives |
Impact of FTT on trading with two basis points across asset classes increasing incrementally over five years to 10 basis points ongoing |
|
Individual investors and 401(k) plan holders, after 40 years |
$8.07 billion |
$390 million |
$193.42 million |
|
New Jersey Division of Pensions & Benefits, after 30 years |
$8.15 billion |
$2.35 billion |
$2.28 billion |
|
NJBEST 529 College Savings Plan, after 30 years |
$556.94 million |
$216.32 million |
$206.7 million |
|
New Jersey residents participating in the NJ ABLE plan, after 30 years |
$383.35 million |
$76.67 million |
$74.76 million |
State Assemblyman John McKeon (D-Essex) had proposed an FTT in A4402, legislation he introduced on July 9. The bill would impose a tax on high-quantity processors of financial transactions at $0.0025 per transaction. On Sept. 14, State Sen. Stephen Sweeney (D-West Deptford) introduced the Senate version, S. 2902. Both are currently before committees: the Assembly Financial Institutions and Insurance Committee and the Senate Budget and Appropriations Committee, respectively. And while an FTT had been part of talks concerning the fiscal year 2021 state budget, it was dropped in the $32 billion budget proposal. Still, Gov. Phil Murphy (D) said at a Sept. 17 news conference that it’s still a possibility an FTT may be pursued in the future.
