Memorandum In Support of S6203

NEW YORK STATE SENATE
INTRODUCER’S MEMORANDUM IN SUPPORT
submitted in accordance with Senate Rule VI. Sec 1
 

 
BILL NUMBER: S6203
 
SPONSOR: SANDERS

 
TITLE OF BILL:  An act to amend the state finance law, in relation to
the repeal of the rebate for stock transfer tax paid and the funds of
the stock transfer tax fund and the dedicated infrastructure investment
fund; to amend the environmental conservation law, in relation to estab-
lishing the safe water infrastructure action program for the purpose of
making payments toward the replacement and rehabilitation of existing
local municipally-owned and funded drinking water, storm water and sani-
tary sewer systems; to amend the tax law, in relation to taxes imposed
in certain transactions; to repeal section 280-a of the tax law relating
to the rebate for stock transfer tax paid; to repeal section 92-i of the
state finance law relating to the stock transfer incentive fund; and to
repeal certain provisions of the administrative code of the city of New
York relating thereto
 
 
PURPOSE OR GENERAL IDEA OF BILL:
 
To repeal the electronic rebate of the stock transfer tax, collect 100%
of this tax and dedicate the funds to the Metropolitan Transportation
Authority (MTA), the maintenance and repair of state highways and bridg-
es (NYSDOT), the New Your City Housing Authority (NYC HA), the infras-
tructure, maintenance and development of passenger rail lines for AMTRAK
in the northeast corridor, the Consolidated Local Street and Highway
Improvement Program (CHIPS), the municipal aid and incentives program
(AIM), the safe water and infrastructure action program, the downstate
and upstate transits systems and the clean energy fund.
 
 
SUMMARY OF PROVISIONS:
 
Section 1. Deposits the full collection of the stock transfer tax into
the following accounts:
 
i. Twenty-five percent shall be directed to the Metropolitan Transporta-
tion Authority(MTA)Financial Assistance fund
 
ii. Ten percent shall be directed to the maintenance and repair of the
New York City Housing Authority (NYCHA)
 
iii. Fifteen percent shall directed to the Highway and Bridge Capital
Account in the dedicated highway and bridge trust fund (NYSDOT)
 
iv. Ten percent shall be directed towards the infrastructure, mainte-
nance and development of passenger rail lines for AMTRAK in the North-
east Corridor
 
v. Five percent shall be directed to the Consolidated Local Street and
Highway Improvement Program (CHIPS)
 
vi. Five percent shall be directed to the safe water and infrastructure
action program (SWAP: as established by section 8)
 
vii. Five percent shall be directed to the Municipal Assistance State
Aid Fund (AIM)
 
viii. Five percent shall be directed to the Downstate Transit System ix.
Five percent shall be directed to the Upstate Transit System
 
x. Fifteen percent shall be directed to the Clean Energy Fund (NYSERDA)
 
Section 8: Establishes the Safe Water and Infrastructure Action Program;
a stream of funding to local governments state-wide for the repair,
maintenance and capital improvement of drinking water, storm water and
sewer systems
 
Section 9: Provides for the stock transfer tax to be collected should
any activity in furtherance of the transaction occur in the State of New
York or if any party involved in the transaction satisfies a nexus with
New York State which shall be defined as broadly as it is permitted
under the United States constitution.
 
Section 10: Effective Date.
 
 
JUSTIFICATION:
 
From 1905 to 1981, New York State imposed a tax on the sale of securi-
ties. The State began rebating the tax in 1979 so that it is now 100%
rebated back to the industry. As explained below, the 100% rebate is no
longer justifiable.
 
New York State has failing infrastructure state-wide. Roads, bridges,
the New York City Housing Authority, public transit both upstate and
downstate, passenger rail, water and sewer infrastructure, are all in
massive disrepair.
 
To transform New York State's failing infrastructure, we must commit to
raising revenue. Conservatively, the stock transfer tax will raise
approximately $13 billion annually (based upon a 10 year average of
collections). There is no other revenue stream, with the exception of
the raising the state income tax, that will immediately raise this level
of revenue.
 
For years New York State has not committed to raising the revenue neces-
sary to fund such basic programs as CHIPS and AIM to a level that can
actually achieve results. Our passenger rail system is multiple decades
behind those of Europe and our public transportation system in the city
of New York is being supported by fees and taxes on low- and middle-in-
come individuals.
 
On February 15, 2019, Comptroller DiNapoli issued a statement warning
that state revenue is sagging and released the January revenue numbers
showing a decline in projected revenue to the state of more than $2
billion. In that statement, DiNapoli said the state needs to prepare for
the economy slowing down.
 
"New York's revenue picture is increasingly challenged. The final Janu-
ary revenue numbers for the state released by my office today confirm
the substantial shortfall the Governor and I announced earlier this
month. In addition, the Division of the Budget's updated financial plan
reduces projected tax receipts in the coming years by billions of
dollars," DiNapoli said in a statement.
 
"Given the unpredictable revenue environment we now face, we should take
an extremely cautious approach when negotiating next year's budget. As
one step, I urge the Governor and Legislature to make the prudent finan-
 
cial decision to substantially build up the state's reserves to help
better prepare for an economic downturn."
 
The stock transfer tax is a revenue generator that operates as an indi-
rect tax, rather than a direct tax like property or income.  Stocks are
also predominantly owned by the wealthiest of Americans. The top 10% of
American households, as defined by total wealth, now own 84% of all
stocks in 2016, according to a recent paper by NYU economist Edward N.
Wolff. Furthermore, while virtually all (94%) of the very rich reported
having significant stock holdings-as defined as $10,000 or more in
shares-only 27% of the middle class did.  (The study framed that middle
class as the group between the poorest 20% and the richest 20% of Ameri-
cans.)1
 
The stock transfer tax is infinitesimal, as the schedule from the New
York State Department of Taxation and Finance shows below:
 
Sale or agreement to sell at less than $5 per share              1 1/4¢
 
Sale at $5 or more but less than $10 per share                   2 1/2¢
 
Sale at $10 or more but less than $20 per share                  3 3/4¢
 
Sale at $20 or more per share                                    5¢
 
Transfers of stock or certificates of interest other than by sale
2 1/2¢
 
While the tax itself is infinitesimal, the volume of trading is what
drives this revenue stream to at least $13 billion. During financial
crises, trading volume increases (thus increasing the stock transfer tax
revenue), while income and property tax revenues decrease. This revenue
will offset decreased state income tax collections and local property
tax collections and has the potential to stabilize our state budget when
our direct tax revenues are falling. Which, according to Comptroller
DiNapoli, is happening now.
 
Additional benefits of this legislation would be the economic boom
created by this revenue stream in employment, construction materials and
other ancillary businesses. With significant investment in infrastruc-
ture, property values increase benefitting local governments including
school districts. Unlike the temporary federal investment in infrastruc-
ture following the Great Recession of 2008, this would be an annual
collection and investment. This legislation also directs investment into
the Clean Energy Fund, which would spur dramatic growth in the renewa-
bles sector with the goal of ending our dependence on fossil fuels.
 
Should we enact this legislation, the following schedule indicates an
average the amount of annual revenue that could be achieved (based upon
the 10 year average in stock transfer tax collections:
 
------------------------------------------------------------------------
                                   |    |     Stock       |
                                   |    |  Transfer Tax   |
                                   |    |  Revenue Annual |
           Entity                  | %  | Collection      | Areas Served
------------------------------------------------------------------------
Metropolitan Transportation        |25% | $3,250,000,000  | NYC, Long
Authority (MTA)                    |    |                 | Island,
                                   |    |                 | southeastern
                                   |    |                 | New York and
                                   |    |                 | Connecticut
                                   |    |                 |
New York City Housing Authority    |10% | $1,300,000,000  | State of
(Repairs)                          |    |                 | New York
                                   |    |                 |
Dedicated Highway and Bridge       |15% | $1,950,000,000  | New York
Trust Fund (NYSDOT) {disbursed     |    |                 |   City
to the Highway and Bridge          |    |                 |
Capital Program}                   |    |                 |
                                   |    |                 |
AMTRAK                             |10% | $1,300,000,000  | State of
                                   |    |                 | New York
                                   |    |                 |
Consolidated Highway Improve-      | 5% | $650,000,000    | State of
ment Program (CHIPS)               |    |                 | New York
                                   |    |                 |
Safe Water Action Program          | 5% | $650,000,000    | State of
(SWAP)                             |    |                 | New York
                                   |    |                 |
Aid and Incentives to              | 5% | $650,000,000    | All mun-
Municipalities (AIM)               |    |                 | icipalities
                                   |    |                 | outside
                                   |    |                 | of NYC
                                   |    |                 |
Downstate Transit                  | 5% | $650,000,000    | Rockland,
                                   |    |                 | NYC, SI
                                   |    |                 | Ferry,
                                   |    |                 |Westchester,
                                   |    |                 | Suffolk,
                                   |    |                 | NYCDOT,
                                   |    |                 |NYSDOT Trans-
                                   |    |                 | Hudson and
                                   |    |                 | Downstate
                                   |    |                 | formula
                                   |    |                 | systems
                                   |    |                 |
Upstate Transit                    | 5% | $650,000,000    |CDTA, CNYRTA,
                                   |    |                 | RGRTA, NFTA
                                   |    |                 | and remain-
                                   |    |                 |ing upstate
                                   |    |                 | systems
                                   |    |                 |
Clean Energy Fund (NYSERDA)        |15% |$1,950,000,000/4=| State of
{appropriated to NYSERDA and       |    |                 | New York
divided equally among the 4        |    |                 |
investment portfolios}             |    |                 |
Market Development:                |    | $487,500,000    |
NY-SUN:                            |    | $487,500,000    |
NY Green Bank:                     |    | $487,500,000    |
Innovation and Research:           |    | $487,500,000    |
------------------------------------------------------------------------
 
 
LEGISLATIVE HISTORY:
 
New bill
 
FISCAL IMPLICATIONS:
 
As indicated.
 
 
EFFECTIVE DATEE:
Immediately