New Jersey Reconsiders Financial Transaction Tax

A troubling New Jersey financial transaction tax proposal, which appeared to be gaining in popularity over the last few months, has reportedly been left out of the 2021 budget deal Governor Phil Murphy struck with legislative leaders last week. The decision to drop the transaction tax from the deal came days after the Wall Street Journal reported that prominent stock exchanges with data centers in New Jersey were prepared to exit the state if the tax plan was adopted. Although the financial transaction tax may be off the table this round, Governor Murphy still likes the idea and we are hearing that the concept is not permanently dead.

S2902/A4402 would impose a financial transaction tax on persons or entities that process 10,000 or more financial transactions through electronic infrastructure located in New Jersey during the year. According to the bill, there are reportedly billions of financial transactions processed daily, and many of those are processed through infrastructure located in New Jersey. The tax would be a quarter of a cent per financial transaction processed in the state and be levied on the processor.

Many well-known New York stock exchanges maintain their electronic infrastructure in New Jersey and have expressed their intention to leave New Jersey before becoming subject to the tax, which they argue harms not only their customers but also ordinary investors because the costs of the tax are passed down from the exchanges to everyone else in the market. Many US stock exchanges already maintain backup facilities in the Midwest. An industry-wide effort to test those Midwestern facilities is scheduled for September 26 to demonstrate their preparedness, and willingness, to relocate.

New Jersey’s financial transaction tax proposal may drive data center businesses out of the state before it is even adopted or formally considered by the state legislature, which teaches a valuable lesson: In a post-coronavirus world, states looking to make up billions in deficits by aggressively taxing businesses that survived the economic crisis risk finding out just how mobile businesses have become.

Stephen P. KranzStephen P. Kranz
Stephen (Steve) P. Kranz is a tax lawyer who solves tax problems differently. Over the course of his extensive career, Steve has acquired specific skills and developed a unique approach that helps clients develop and implement holistic solutions to all varieties of tax problems. He combines strategic thinking with effective skills for the courtroom, the statehouse and the conference room. Read Stephen P. Kranz's full bio.


Alysse McLoughlinAlysse McLoughlin
  Alysse McLoughlin focuses her practice on state and local tax matters, with particular emphasis on working with financial services companies. Alysse handles state tax litigation and also advises with respect to planning opportunities. Read Alysse McLoughlin's full bio.


Kathleen M. QuinnKathleen M. Quinn
Kathleen Quinn focuses her practice on state and local tax matters. She represents business and individual taxpayers at all stages of state and local tax controversies, including the audit, administrative, and judicial levels. Kathleen also advises clients on state and local tax planning opportunities and the state and local tax consequences of corporate restructurings and other business transactions. Read Kathleen Quinn's full bio. 


AvatarJonathan Hague



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