SIFMA Blasts Proposed Financial Transaction Tax

The Securities Industry and Financial Markets Association is criticizing Rep. Chris Van Hollen’s just-released tax reform plan calling for a financial transaction tax, which SIFMA says is “effectively a sales tax on savers, mutual fund owners, pensioners and investors.”

While the plan, by the ranking member on the House Budget Committee, includes “innovative ideas to help middle-class Americans,” imposing a financial transaction tax is “an old idea with a long history of negative consequences for savers and investors and for the efficient functioning of capital markets,” said SIFMA President and CEO Kenneth Bentsen Jr., in a statement.

Maryland Democrat Van Hollen stated in his tax reform plan that the United States “can curb the kind of financial speculation that creates no value for the economy by implementing a tiny fee on financial market transactions, and then use the revenue to provide tax relief to American workers and their families.”

But Bentsen argues that such a tax ultimately “would be paid by every American that holds a retirement account, owns a mutual fund or is part of a pension plan,” with retirees likely being “hit the most.” Also, he said, such a tax “will raise the cost of saving and undermine what the congressman seeks to accomplish.”

A spokesperson for the Investment Company Institute told ThinkAdvisor that while ICI awaits the release “of details that would allow us to analyze this proposal more closely, experience tells us that a transaction tax is simply a bad idea.”

No matter how it is structured, “such a tax could harm individual fund investors and create market distortions that would reduce the efficiency of markets for all participants — including middle class investors — by shrinking market volumes, impairing liquidity, and distorting price discovery.”