Surrounded by Labor, Gottheimer Raises Alarm on Proposed NJ Tax on Financial Transactions That Will Drive Jobs, Dollars Out of State
NYSE Center in Mahwah Threatens to Move
$2 Million Whack on Local Municipal, County Budgets
MAHWAH, NJ — Today, Tuesday, October 20, 2020, U.S. Congressman Josh Gottheimer (NJ-5) stood with the Building & Construction Trades of Bergen County and International Brotherhood of Electrical Workers (IBEW) Local 164 to sound the alarm on how a new financial transaction tax being considered by the New Jersey State Legislature will force the New York Stock Exchange back-end facility and other financial data processing centers throughout New Jersey to move out of the state, cost the Fifth District hundreds of jobs, and cause a multi-million dollar loss in local tax revenue.
“I’m here today for one simple reason: this proposed financial transaction tax will cost the Fifth District at least two hundred good paying jobs, including the hardworking men and women of labor, it will force a key sector out of our state, and it will cost our local community significant revenue, two million dollars a year in property taxes, at a time when we certainly can’t afford it,” said Congressman Josh Gottheimer (NJ-5). “As soon as the state imposes this new tax, the back-end of the stock exchange here in Mahwah, and all the banks that have a presence here, will move, in unison, to a new location out-of-state. This isn’t a guess. It’s not conjecture. The New York Stock Exchange has told us, in no uncertain terms, that if we are the only state that decides to tax financial transactions, they’ll have no choice but — for competitive reasons — to pack up this data center behind us, and all the jobs, and move to their existing center in Chicago. That is something none of us can stand for.”
New Jersey is considering a financial transaction tax, which would impose a tax on firms that process large quantities of stock trades and financial transactions through all the electronic infrastructure located throughout New Jersey.
- According to the IBEW, 25% of their North Jersey locals work just on data centers alone. The New Jersey State Association of Pipe Trades said recently that this proposed tax would cost many union members their livelihoods.
- More than a billion financial trades and transactions occur every day through the New York Stock Exchange’s electronic trading systems in their Mahwah data center. The New York Stock Exchange told New Jersey state lawmakers earlier this week that they are prepared to move operations out-of-state should a new tax be imposed on electronic trades via data servers.
- Because of improvements in technology and connectivity, financial firms no longer need to be in close proximity to New York City, as they can place data centers nearly anywhere.
- In late September, the New York Stock Exchange tested a transition out of New Jersey, moving their transactions to a secondary data center located in Chicago — meaning that all the jobs and revenue that these centers bring in can easily leave if this proposed tax is imposed.
- If the New York Stock Exchange data center in Mahwah closed its doors, the Township of Mahwah would lose $2 million in annual property tax revenue, and local utility company Orange & Rockland would lose millions of dollars in revenue.
- According to the U.S. Bureau of Economic Analysis, every dollar spent on financial securities services in New Jersey contributes $1.22 to New Jersey’s economy. The securities sector employs more than 38,000 workers throughout New Jersey. In total, there are nearly 200,000 New Jersey workers employed by the financial services and insurance sectors.
- This industry also indirectly supports 55,000 New Jersey workers in other industries, including teachers, restaurant workers, and workers in shopping centers, who all contribute nearly $1.4 billion in New Jersey state and local taxes every year.
- In 2012, France imposed a new tax on French stock trading for large French companies and a new tax on high frequency trading. After this was all implemented, one-third of the trading for French public companies moved to London and other European markets, and France did not raise even half the revenue they had projected in 2012 or 2013.
Gottheimer was joined today by Bergen County Commissioner and IBEW 164 President Tom Sullivan, IBEW 164 Business Manager/Financial Manager Dan Gumble, and Building & Construction Trades of Bergen County President Rick Sabato.
Watch today’s announcement HERE.
Gottheimer’s remarks as prepared for delivery are below.
I’m here today for one simple reason: this proposed financial transaction tax will cost the Fifth District at least two hundred good paying jobs, including the hardworking men and women of labor, it will force a key sector out of our state, and it will cost our local community significant revenue, two million dollars a year in property taxes, at a time when we certainly can’t afford it.
To add insult to injury, this proposed financial transaction tax — or “FTT” — which the state claims will raise new revenue for the state by taxing stock trades processed through all the electronic infrastructure here, won’t actually produce new tax revenue.
Why? Because as soon as the state imposes it, the back end of the stock exchange here in Mahwah, and all the banks that have a presence here, will move, in unison, to a new location out-of-state. This isn’t a guess. It’s not conjecture. The New York Stock Exchange has told us, in no uncertain terms, that if we are the only state that decides to tax financial transactions, they’ll have no choice but — for competitive reasons — to pack up this data center behind us, and all the jobs, and move to their existing center in Chicago.
This is exactly what happened with Hertz and Avis and other major consumers and once they’re gone, they don’t come back. I spoke with Senator Sarlo and Lagana who have expressed severe reservations about this bill and are concerned on the impacts to our county.
Just as a reminder, because of the pandemic, we have too many North Jersey towns facing budget issues, and we’ve already lost too many jobs in New Jersey — with our state currently at 10.9% unemployment. So — when our state is already hurting — our taxpayers, residents, and retirees are about to get completely whacked, all while jobs are already being driven out of our state.
Guess what else will move away? Yes, the projected new tax revenue from the FTT. Plus, all the other jobs and businesses that have sprung up in this area, and around other financial data centers in our state, that want to be closer to the point of transaction.
That’s what happens here: every day, more than a billion financial trades and transactions occur right here in Mahwah. If you went inside, in this building which is the size of six and a half football fields, you’d see rows and rows of data servers. Nearly every trade in the country, from your broker, or what’s done online, goes through here. It’s also not hard to shift their servers in a matter of days and weeks to somewhere else in the country.
This “FTT” — this financial transaction — simply won’t accomplish any of the goals originally set out to achieve when it was proposed. It will do just the opposite. It will actually cost us tax revenue, it will cost us critical jobs, and it will ultimately drive a key economic sector, where we currently lead, out of our state. The exact opposite of intended effects. That’s why the clouds are looming over us today.
I know there are talks of lowering the tax and timetable, but that won’t matter, because as they are already telling us that they’re going to pack up and leave. They have no other choice. And once one goes, they all go.
Now, there are some who don’t believe that the New York Stock Exchange would actually move this center and others like it out of New jersey. That the banks who’ve called us won’t move the back-end jobs they have near here, like those at Barclays, CME Group, and Fidelity.
If that’s the case, then what will happen is that suddenly this new financial transaction tax
will not only hit the financial institutions, but, as you’d imagine, it will be passed on to everyday consumers, taxpayers, retirees living off their pensions, and those trying to save for retirement.
We obviously need to find ways to plug gaps in our state budget. I’ll be the first one to make that argument. Along with 25 Democrats and 25 Republicans in the Problem Solvers Caucus, I’ve spent the last months leading a fight for a COVID relief deal in Congress – and ensuring it includes significant resources for our state and local budgets.
But the FTT isn’t the answer.
Just a few more facts:
First, here in New Jersey, we have hundreds of companies that, across the country, use our state’s financial data processing centers. Combined, they support hundreds and thousands of New Jersey jobs. When centers like this one were first established, for pure technology speed reasons, these firms needed to be as close as possible to the stock exchanges in New York City.
Because of improvements in technology, that’s no longer the case. The financial firms can put these data centers nearly anywhere.
In fact, in preparation for this new tax, the New York Stock Exchange already tested this out. In late September, they tested a transition out of New Jersey, moving their transactions to a secondary data center located in Chicago — meaning that all the jobs and revenue that these centers bring in are already one foot out the door.
This means, if this new tax happens, the New York Stock Exchange will transfer all of its electronic trades to a Chicago-based data center, without any real disruption at all.
According to the U.S. Bureau of Economic Analysis, every singular dollar spent on financial securities services in New Jersey contributes one dollar and twenty-two cents to the state economy, and the securities sector employs more than 38,000 workers throughout the state. In total, the financial services sector, along with our insurance sector, employs nearly 200,000 total New Jersey workers.
If this data center in Mahwah leaves because of this higher tax, other financial firms with data centers in Secaucus, Carteret, and other New Jersey towns may leave as well — just to stay competitive — which will cause unforeseen economic effects across the State.
This industry also indirectly supports 55,000 NJ workers in other industries, including teachers, restaurant workers, and workers in shopping centers — part of some of the hardest hit groups from the economic hardships caused by the pandemic — and these workers contribute nearly $1.4 billion in New Jersey state and local taxes every year.
Second, Of course, if this facility shuts its doors, it impacts the workers employed in and around the facility first and foremost, which is why I’m proud to be standing here today with the International Brotherhood of Electrical Workers (IBEW) members — shoulder to shoulder — representing the hardworking women and men of labor. According to the IBEW, 25% of their North Jersey locals work just on data centers alone. And the IBEW is not alone among workers concerned about what this tax would mean for them. Mike Maloney, the President of the New Jersey State Association of Pipe Trades, said last week that this legislation would cost many of his union members their livelihoods. With New Jersey jobs already down, this is not a hit our district or our families can take.
After the immediate job loss, these effects ripple out to touch everything else.
Here in Mahwah, it obviously takes a good bit of power to make this place run. So, the economic damage doesn’t stop at the folks who could be put out of work here. In fact, local utility company Orange & Rockland would lose millions of dollars in revenue.
On top of that, the Township of Mahwah would lose $2 million in property taxes if they shut their doors here. For reference on what that does to a local town budget: the entire annual expenditure for the Mahwah Fire Department and EMS is around $500,000. So, if the New York Stock Exchange decides to move to Chicago, Mahwah would lose four times their yearly expenditures they spend right now on our frontline EMS and firefighters, not exactly a smart move in the middle of a pandemic.
If the tax does go into effect and the financial firms have to immediately take on that new burden, what we’re going to see is that tax passed down to our residents as a cost of doing business, making every day saving more costly for families, local investors, everyone trying to save nickel and dime for their retirement, and those already living off their pension.
Most concerning of all, as I mentioned earlier, is that the real burden of this new tax would be placed on ordinary investors, such as retirees, pension holders, and those saving for their children to go to college.
According to a recent study by Vanguard, for someone saving and investing $10,000 every year for more than 40 years for retirement — if a tenth of a percent tax is imposed on purchase of securities, that could cost the person saving for retirement some $36,000. That equals more than three and a half years of annual savings.
Bottom line: as firms pass on the taxes as just a cost of doing business, everyday investors and residents will be the ones bearing the higher cost.
If you’re not convinced yet, I’ve got some even sadder news: this proposed tax may not even work at all to help the State of New Jersey’s bottom line.
I firmly believe we should be taking steps to lower taxes and make life more affordable for our families–– including reinstating the State and Local Tax Deduction.
Other countries have tried this kind of tax. In 2012, France imposed a new tax on French stock trading for large French companies, and a new tax on high frequency trading too. After this was all implemented, stock trading volume in the Paris Stock Exchange declined an average of 16% within the first two months, and 40 of the largest companies on the exchange declined 21% in just the first 10 days.
To mitigate these massive issues, the companies in question took swift action, and they up and left! One-third of the trading for French public companies moved to London and other European markets. France didn’t raise even half the revenue they had projected in 2012 or 2013.
We need to fully avoid the same thing happening here in New Jersey. Our families, the hardworking women and men of labor, everyone saving for retirement, our local towns, and — truly — all the hundreds and thousands of jobs that rely upon our state’s financial data processing centers, cannot afford this loss.
The bottom line is we cannot place this sort of tax on our financial transactions, because the firms that have processing centers in North Jersey and all throughout out state — where these transactions actually take place digitally, like here at the New York Stock Exchange data center — will pack up ASAP, head out of state, and cut all the jobs here, including those of hardworking men and women of labor. They have already proven that they can and that they will.
That is something none of us can stand for.
Enough is enough. This tax would be foolish, and it would have awful ripple effects all throughout our great state.
I’m proud to be standing here today with the International Brotherhood of Electrical Workers to sound the alarm.
There are plenty of solutions, but this is not the right solution.
I know that we can work together here in New Jersey to ensure that our businesses and jobs can stay here and grow here, and keep providing the hundreds and thousands of jobs our families rely on, and ensure that here in Jersey, our best days will always be ahead of us.
Thank you and God bless you.