“All you ever wanted to know about the NYS STT but were afraid to ask.” A renewed rebate repeal bill drive is coming…
New York State has had a very modest tax on the value of all stock trades
on the NYSE and the NASDQ on its books since 1905 — it now averages
just .1% (one-tenth of one percent) of stock trades. The tax was originally
adopted by a pragmatic Republican governor who was just trying to raise
revenues and fix a budget crisis, over the objections of Wall Street, the New
York Times, and other special interests. For more than seven decades, contrary
to their concerns, it worked perfectly. It was effectively a progressive sales tax
on financial speculation, it was relatively easy to collect, it was paid to a great
extent by non- New Yorkers, and most important, it raised $billions in revenue
(in $2025). In the late 1970s, however, reflecting Wall Street’s increased
political clout, another New York governor had the tax rebated to Wall Street
investors. By then New York’s two leading exchanges had expanded
tremendously — despite the tax ! — to account for at least forty percent of trading
on the world’s 85 stock exchanges. So, since 1978, New York State has
rebated more than $430 billion of badly needed tax revenues to the wealthiest
people on the planet!
For years I have supported legislation that was introduced in the New York
legislature to repeal this self-inflicted rebate. The current bills (S.01237/
A.01494) introduced by Rep Phil. Steck and Senator James B. Sanders is now
more timely than ever.
On the grounds of tax fairness, collectability, transparency, and most
important, the ability to raise $billion of badly-needed revenues, the case for
repealing the STT Rebate to Wall Street is overwhelming.
Easy to Collect. As taxes go, the STT is relatively easy and painless to
collect — an average of just 1 cent per dollar (.1% one tenth of one percent
average) of stocks traded. This doesn’t sound like much, but as we’ll see,
it really adds up.
Fair. It is a fair tax — effectively a tiny progressive sales tax on $trillions
of unproductive stock speculation by the richest people on the planet.
Mostly Paid by Speculators or Non-New Yorkers. Much of the STT is
paid by non-New Yorkers and financial speculators. These are two “we
happy few” groups that should be delighted to help us foot the bill for vital
New York public services like subways, hospitals, police and fire,
hospitals, educational systems, clean air and water, parks, and the public
educational and cultural institutions that have long been the envy of the
free world. As many distinguished economists from John M. Keynes and
James Tobin on down have argued, this tax also helps to make financial
markets more transparent and efficient, by forcing money laundering and
fraudulent trading into the sunlight, where they wither and die.
Raises $Billions in Revenue. Most important, this tax promises to yield
$billions in badly needed annual tax revenue. Since 2016, when Phil
Steck first introduced his bill to repeal the rebate, speculative global stock
trading has exploded from around $120 trillion to record levels — in 2025,
it will exceed $180 trillion worldwide. Our two leading New York
exchanges now consistently account for up to 40 percent of that market –
– at least $60 to $80 trillion a year that flow through NY exchanges. So
the potential revenues really add up. Even allowing for the time required
to phase out the rebate and the possible impact of the STT on
speculation, we estimate that NYS should soon be realizing at least an
extra $15 billion to $20 billion per year of revenues.
Despite the Stock Market Downturn. We note that this record amount
of stock trading has occurred even while the market capitalization of all
stocks listed on the NASDQ + NYSE has lost -$10.7 trillion since January
2025 — largely due to the recent unilateral position of Trump’s chaotic
cockamamie tariffs scheme. Despite this, since the volume of global stock
trading has kept growing whether the stock market rises or falls, this tax
revenue stream is relatively stable. It therefore presents an opportunity to
establish a public investment fund that can multiply the value of the tax
revenues many times over. This would permit us to make crucial public
investments in areas like mass transit, health care, soil conservation,
clean water and green energy that cannot wait.
A Great Platform for Voluntary Contributions. Finally, using the
mechanism of a revitalized STT that encompasses millions of stock
market investors, we can imagine a system that goes well beyond
“involuntary” taxation. This would enable investors to make tiny additional
voluntary contributions to worthy NY-based not-for-profits — much as we
now with cash at coffee shops, but on a much larger scale. At a time when
many NY NGOs and educational institutions are starved for funding and
are also losing their federal tax deductions simply because they refuse to
bend the proverbial knee, this innovation will be path-breaking.
The Relocation Bogeyman
Let’s address head-on one common concern about this proposal: Will the
leading New York stock exchanges simply pick up and move to, say, Chicago
or Texas or Hong Kong, Paris, Frankfurt or London, In response to ending the
NYS STT rebate? The short answer is no. The long answer is NFW.
Bipartisan Support. This “movable feast” issue has been a bogeyman
ever since the original adoption of the NYS STT in 1905. It was pushed
through by Governor Frank W. Higgins, a Republican governor (1905-
6)! At the time, he was also seeking practical solutions to a deep NYS/
NYC budget crisis, and won the support of President Theodore
Roosevelt (1901-9) and “progressive Republicans.”
Old Bogeyman. At the time, several Wall Street lobbyists and even the
venerable New York Times worried that the NYSE might relocate to New
Jersey. But common sense prevailed over this hand-wringing. Governor
Higgins’s modest .1% STT went into effect, and yet, as he had projected,
the New York trading floors stayed put.
Not a Theory – Worked for Decades. The NYS STT is not based on
crazy mad theories. As noted, it was successfully collected for 1905 until
1978-82, collecting $billions (in $2025) in badly needed revenue — much
of it paid by non-New Yorkers. Then, in 1978-82, the rebate was phased
in by a governor who had been captured by Wall Street’s special
interests, especially high-frequency traders.
Since then, we estimate that at least $430 billion of badly needed NYS revenue has been
effectively rebated to Wall Street interests, especially the heavy
traders and speculators who came to dominate trading — and political
campaign contributions, especially to key politicians on the state and
federal level.
Many Other FTTs In Place. So would the two giant NY exchanges move
now, in response to a NYS STT rebate repeal? Well, first of all, Hong
Kong, London, Frankfurt, London, Paris, Mumbai, Nairobi,
Johannesburg, and more than 40 of the world’s 85 stock exchanges
already have financial transactions taxes of their own, several of which
have rates that are higher than the NYS STT. In general, tax authorities
as well as tax justice activists in these places would actually welcome
NYS’ reinstatement of the STT — it would help to clear the way for them
to implement more effective versions of their own STTs. They recognize
that the sheer size, efficiency, credible regulation, high-capacity trading
network infrastructure, clustered services, and skilled human capital
provided by NY’s two huge exchanges allows NY to set the table for the
global industry.
Huge Relocation Costs. It is precisely this unique cluster of credible
regulation, technology, skills, and reliable, trusted client and professional
service relationships that — in practice — would make it far more costly to
move these exchanges to another greenfield zero-STT location than even
the hypothetical $15 to $20 billion in tax savings for clients that that might
generate.
Low Incremental Cost for Most Investors. Remember — many of
these same clients are used to paying annual asset management fees
and trading fees that are at least 5 to 10x as high as the STT’s .1% per
trade. 3 For most retail clients and pension funds, our analysis shows
that the STT is a rounding error. On the NASDQ exchange, for
example, where stock trades have recently averaged around $8800,
this amounts to an extra $8.80 per trade.
High-Frequency Traders – No Loss. High-frequency traders, whose
in-and-out millisecond trades may well now account for a majority of
trades on the exchanges, will indeed feel a greater STT pinch. But (a)
this is arguably exactly as it should be, since another key point of the
STT is to discourage speculation (b) given the high profit margins
reportedly realized consistently by leading high-frequency traders, the
high fixed costs of migration (see below), and the comparatively low
rate of the STT that is proposed, it is by no means clear that they will
not just choose to grin and bear it.(c) Abolishing the STT rebate will at
least relieve them of the $millions in campaign contributions that they
have been paying specifically to prevent this rebate from being
abolished.
Lengthy Costly Migrations. Wholesale migrations of entire
exchanges to “Red State capitals” like Dallas, Austin or Miami would
take years, and entail tens of $billions of expenditure in trading desks,
high-speed network and communications, backup data storage,
underseas cable infrastructure, related transportation hubs, and
network security.
Florida and Texas Heat and Weather. Most of the proposed
alternative locations in the US are also right in the path of dramatic
global warming impacts, like sea rise, catastrophic storms (Florida and
Texas), hurricanes (Florida and Texas) or fires.
Florida and Texas Unstable Power Grids They also have
notoriously unstable, non-integrated electric power grids (Texas), or
are heavily dependent on aging nuclear power plants (Florida, Texas)
that consume vast quantities of seawater for cooling and to this day
have no solutions for nuclear waste storage other than to stash it in
on-site cooling pools, subject to extraordinary power outage risks.
They also have limited undersea cable connections to Europe and
Asia — absolutely vital for the daily trading activity of the large New
York exchanges.
Red State Culture — Really? Ask any serious finance professional,
asset manager, trading specialist, or trading security specialist who
lives in New York City or its environs how they really feel about long-
term relocation to Miami, Dallas, Chicago or even Austin. Have they
ever tried these places even for a week?
Fine Tuning/ Revenue Sharing. One great feature of the STT as a
tax instrument is that it is analogue, not digital — it can be finely tuned
to respond to changes in market behavior, whereas much of that
behavior itself has to occur in discrete steps. So, if, for example, NYS
discovered that one of its exchanges were about to relocate to
Timbuktu because the STT rate has become non-competitive, it can
be dialed down — as long as necessary. On the other hand, if a
particular “foreign jurisdiction” credibly threatens the NYS STT tax
base, suitable revenue sharing agreements with these jurisdictions
might be reached.
“Invisible Hand” Mythology. The libertarian pipedream has long been
a world where financial exchanges and financial assets, including stocks,
bonds, and now crypto currency and digital NFTs for works of art or even
real estate, become “citizens of nowhere” — anonymously traded around
the clock on markets that are totally untaxed and unregulated, policed
only by the miraculous workings of the so-called “invisible hand.”
These articles of faith remind us of the line about the difference between
a terrorist and a libertarian: “You can negotiate with a terrorist.” Or as an
Indian economist once put it, “The invisible hand is nowhere to be seen.”
Painful experience shows that a globalized world without fair taxes and
tough financial regulation usually ends being a proverbial war of all
against all — dominated by clever chicanery, tax dodging, kleptocracy,
financial fraud, regular financial crises, and the rule of the gun, and the
.1%.
Maybe that’s where we are headed — a return to economic feudalism on a
massive scale, complete with enclosures, castles, moats, phony elections, and
desperate peasants begging for work. But it is a destination that we should
never willingly choose to go.
Supporting the STT rebate repeal is just one positive progressive action among
many that we can take now to avoid this outcome.
Summary — STT Is Freedom
Supporting the STT rebate repeal is especially important RIGHT NOW. It is one
of the few steps that we can take to prepare for the hard times that may be
headed our way very soon. Indeed, NYC and NYS are once again Ground Zero.
But this time around we are under attack, not by foreign terrorists, but by
irresponsible policies. We need to address this situation precisely as we did
with the original 9/11 — sitting on our hands is no longer an option.
From this angle, the STT Rebate Repeal bill would not only be a massive
progressive revenue generator. It is also an great opportunity to set an example
to states and other countries all over the world.
The Case for Repealing the NYS Stock Transfer Tax Rebate
James S. Henry, Esq. preview.pdf
April 23, 2025