"There is no alternative" to rely on private sector for affordable housing? Restoration of stock transfer tax, says Shiffman, would change the equation

After watching Battle for Brooklyn Monday night, the panelists (including me) got to the inevitable discussion--especially regarding proposed rezonings--regarding the commonly accepted notion that only by building bigger will we get affordability trickling down.

As I wrote in July 2017, then Deputy Mayor Alicia Glen, as the Wall Street Journal reported:

said public housing had been “starved” of federal support for years now, leaving the city with fewer ways of creating affordable housing. “Are we relying too heavily on the private sector?” she said. “There is no alternative.”

Glen's phrase recalled the slogan of a politician with whom I doubt her boss Bill de Blasio identifies: former British Prime Minister Margaret Thatcher, a Conservative who believed in free markets.

In a rich city, the public can pay

At the panel, Ron Shiffman, the legendary advocacy planner and academic, criticized the market-based philosophy. "One problem we're now facing is that planners and city officials have bought into system," he said. "They don't realize that parks in past weren't paid for by developers, but paid by the public. We didn't build subways, schools, parks, by forcing developers to build higher to get enough revenue to pay for those public amenities."

"We're a rich nation, and a rich city," Shiffman said. (Such rhetoric that sounded not unlike that of de Blasio, who's said--in what some see as the basis for his putative presidential run-- that "There’s plenty of money in the world. Plenty of money in this city... It’s just in the wrong hands!”)

"All we have to do is reinstate the stock transfer tax," Shiffman continued, and the city and state could get billions of dollars. "It's still on the books every day, it's collected and refunded instantly. With that, we could build the parks, we could invest in the infrastructure. We wouldn't have to build the 22- story buildings, or the 30-story buildings, in order to provide the affordability that's necessary for most New Yorkers."

(The latter was a reference to the debate about building in Gowanus. Surely some neighborhoods can absorb taller buildings.)

What about that tax?

Shiffman's right: we do have a stock transfer tax. As explained by the coalition New Yorkers for Fiscal Fairness:

The tax has been in effect since 1915 but unfortunately the money is currently tallied, assessed, collected and then handed right back to the brokers who paid it in the form of a 100% rebate. The tax was fully collected until 1981. The state began rebating the tax in 1979 (at 30%), 1980 (at 60%) and in 1981 (at 100%). 

Their proposal (as of 2010, I think) was:

NYS currently rebates 100% of the nearly $16 billion in Stock Transfer taxes back to brokers right after it is paid. We suggest that 80% be temporarily rebated and the State retain 20% (during our economic downturn) which would result in $3.2 billion annually in state revenue. 

On 2/12/18, upstate Assemblyman Phil Steck, in an Albany Times-Union op-ed, proposed, "New York should reimpose the stock transfer sales tax, which the state had from 1905 to 1981, and dedicate all funds raised, estimated at $16 billion per year, to infrastructure."

His bill, which was amended to proposing a 60% rebate, thus raising $6.4 billion in revenue, never even got a committee hearing in the state legislature. So there are obviously political hurdles. In 2003, the New York City Independent Budget Office was pessimistic, suggesting:

 • The proposed tax would raise existing stock trading costs by 23 percent, almost double the 12 percent increase imposed by the old stock transfer tax before it was phased out. As a result of the increase in transaction costs, trading volume on the New York and American stock exchanges would be cut by 18 percent.
• The impact of the tax on Wall Street and the city economy would eliminate nearly 60,000 private-sector jobs.
• Stock transfer tax revenues would fund close to 38,000 public-sector jobs, resulting in an overall city job loss of almost 22,000. There would be 1.6 private-sector jobs lost for every government job gained.
• The overall city revenue gain after imposing the tax would be close to $2.9 billion, 42 percent less than the $5 billion static forecast.
• Relaxing IBO’s assumption that investors do not leave Wall Street to evade the tax produces much larger economic impacts. If one-third of stock trading activity shifts out of the New York exchanges, job losses in the city could climb to 150,000, and net city revenue gains would fall to zero.

It's not clear those 16-year-old assumptions remain, though the IBO does not include the tax in its annual Budget Options for New York City. In May 2005, a New York Times editorial criticized Democratic candidate Fernando Ferrer for proposing to restore the stock transfer tax:

The day after he spoke, the New York Stock Exchange made its own announcement, that it had bought an electronic trading firm and was going public. That underscored the fragility of the city's hold on its Wall Street businesses. The Ferrer campaign's projected revenue figure of $4 billion in four years from the tax became meaningless, since electronic trading can take place anywhere, bypassing local taxation. New Yorkers were also reminded that the physical stock exchange, too, could conceivably find a less taxing location, and take its jobs there.

In January 2011, columnist Greg David of Crain's New York Business warned that imposition of the tax would push business and jobs out of the city. This year, unsuccessful Public Advocate candidate Rafael Espinal proposed:

It doesn’t have to be like this. There’s a simple solution to making New York a more liveable city, which would raise $11 billion every year: ending rebates of the Stock Transfer Tax and using the money saved to invest in New York’s crumbling transportation and housing infrastructure.
As Public Advocate, Rafael Espinal will call on the State to stop rebating New York’s existing Stock Transfer Tax, and invest that money into the MTA and NYCHA.

So, at the very least, it deserves some discussion--and a legislative hearing.

A national issue

A financial transaction tax (FTT) has somewhat more momentum as a national issue. As noted in a November 2014 essay in Vox by Lenore Palladino & Sean McElwee (and similarly in The Nation):

The idea for a financial transaction tax has been around for since John Maynard Keynes's General Theory. The basic argument is that a small fee would be trivial for long-term investors, and only deter the activities of socially useless high-turnover speculators. The idea began to gain traction in the late 70s and 80s with the rapid growth of the financial sector. In 1989, Lawrence Summers and Victoria Summers proposed a U.S. Securities Transfer Excise Tax, arguing that it could raise some $10 billion annually. Recently, the International Monetary Fund (IMF) has supported a financial transaction tax as well. A metastudy by Neil McCulloch and Grazia Pacillo finds that a Tobin Tax (a type of FTT) would be "feasible and, if appropriately designed, could make a significant contribution to revenue without causing major distortions." 

A big proponent for a national tax (aka a Robin Hood tax or Tobin tax, the latter for the economist James Tobin) is Senior Economist Dean Baker of the Center for Economic and Policy Research (CEPR), who believes it would help curb frequent trading and speculation. A lot of prominent figures have signed on.

In a 3/5/19 press release, Baker said:

"The Wall Street Tax Act, introduced today in the Senate by Sen. Brian Schatz (D-HI) and it's companion bill, the Putting Main Street First Act, introduced by Rep. Peter DeFazio (D-OR), would make our financial sector more efficient while raising a significant amount of revenue."
"This small tax of just 10 cents on every $100 of trades would discourage disruptive short-term trading without impacting the market's ability to finance productive investment. The financial industry would bear almost all of the cost of the the tax. Every day investors and retirees would save money as a result of lower fees from reduced trading.

What about all the objections? CEPR's Baker wrote at length in defense of such transfer taxes on a national basis, responding to many arguments against the desirability of the policy and the enforceability of the tax. (This does not respond to the New York-specific issues, however.)

The more centrist Tax Policy Center was more measured, observing:

An FTT at the rates being proposed and adopted elsewhere would discourage all trading, not just speculation and rent seeking. It appears as likely to increase market volatility as to curb it. It would create new distortions among asset classes and across industries. As a tax on gross rather than net activity, and as an input tax that is not creditable and thus cascades, the FTT clearly can most optimistically be considered a second-best solution.
...Nevertheless, comparing an FTT (or any real-world tax) against an ideal income or consumption tax would be inappropriate. Most feasible taxes are distortionary. It might well be that the marginal cost of raising revenue via a well-designed FTT is lower than via increases in individual or corporate income taxes.

Other ways to find $

I've previously written about Comptroller Scott Stringer's suggestion of raising real estate transaction taxes to fund affordable housing.

Shiffman shared with me a 2012 proposal, from him and Alix Fellman, to elected officials proposing "a housing trust fund financed by a surcharge on property tax and / or a Real Property Transfer Tax (RPTT) that would be levied by the city. Using Fiscal Year 2012 tax figures, we have estimated that a one percent surcharge on property taxes could yield $190 million in affordable housing funds; a two percent surcharge could yield $380 million. Using 2011 property sales data, we have estimated that a five percent surcharge on RPTT could yield $50 million for affordable housing; a 10 percent surcharge could yield more than $100 million."

That would have then raised $480 million a year targeted for public housing and other programs bolstering affordable housing.

The point: there are multiple pathways, if not not necessarily politically simple ones. That goes to another issue Shiffman stressed: ongoing political organizing.