Implementing a tax on financial transactions could cost New Jersey retirees billions from their nest egg while also siphoning billions more from public pension accounts, according to a new report.
According to the organization, the use of a financial transaction tax in New Jersey would have wide-ranging fiscal impacts for residents saving for retirement, children’s education, pensions, 529 college savings plans and other investments.
New Jersey, straddled with ever-mounting debt amid declining revenue from COVID-19 lockdowns and prior shortfalls, has been exploring new revenue sources to shore up their ledger.
An all-out use of a financial transaction tax would lead to a series of unintended consequences, Kirsten Wegner, CEO of Modern Markets Initiative, said.
“Fundamentally, this is a tax on average savers, including 529 plan holders, 401(k) holders and specific pension plans,” Wegner said in an interview with The Center Square. “It’s billed as a wealth tax, but in reality, it impacts everyone who is an investor.”
According to MMI, the New Jersey Division of Pensions and Benefits over 30 years would range from $2.28 billion to $8.15 billion, depending on the tax level.
Residents placing money in 529 college savings plans collectively could be taxed $206.7 million to $556.9 million in the same 30-year time period. Plan holders of a 401(k) could see a $193.42 million to $8.07 billion tax over four decades.
Assemblyman John McKeon, D-Essex, introduced a micro-cent tax on all stock trades in July.
Gov. Phil Murphy’s $32.7 billion spending plan for fiscal year 2021 did not include the transactions tax.
Since submitting his revised budget in late August, Murphy has stated the state’s fiscal plan, which covers nine months through June, is aimed at shifting taxation to New Jersey’s highest earners.
“This budget proposal is not simply about getting New Jersey back to where it used to be, but moving forward to where we need to be by building a new economy that grows our middle class and works for every single family, while asking the wealthiest among us to pay their fair share in taxes,” Murphy said in a statement.
But as persistent revenue shortfalls loom, Wegner said she and others within MMI continue to share the impact that new taxes, such as the financial transaction models, can have on residents of all income levels.
“There’s definitely more of a need for revenue,” Wegner said. “I definitely understand where lawmakers are coming from. There’s huge budget deficits in New Jersey right now. You want to keep the public schools well funded and help with the really important goals. I understand how tough it really is.”
Wegner said MMI continues to advocate for other solutions in closing the gap.
“Our major message to the public is this is a tax on savings and retirement,” Wegner said. “We’re hoping our data will educate lawmakers and the public to, on a granular level, have an understanding of what the impact would be on a financial transaction tax.”
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