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GOP Bill Would Block State-Level Financial Transaction Taxes

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What You Need to Know

  • FTTs “would ultimately be paid by out-of-state investors,” two GOP lawmakers say.
  • The bill blocks states from imposing financial transaction taxes on stock exchanges and BDs.
  • SIFMA, the BD advocacy group, and Americans for Tax Reform, an anti-tax group, support the bill.

Top GOP lawmakers on the House Financial Services Committee introduced legislation Tuesday to block states from imposing financial transaction taxes (FTTs) on stock exchanges and broker-dealers.

The bill, The Protecting Retirement Savers and Everyday Investors Act, was introduced by ranking member Patrick McHenry, R-N.C., and Rep. Bill Huizenga, R-Mich.

Both lawmakers said FTTs “would ultimately be paid by out-of-state investors when the FTT is passed onto them.”

New York and New Jersey are states considering financial transaction taxes. New Jersey’s A4402 would impose a 0.25 cent tax on every financial transaction processed in the state, according to the Tax Foundation. “In New York, some lawmakers have proposed a rate as high as 5 cents per share (1.25 cents for stocks worth less than $5),” the Tax Foundation said.

Americans for Tax Reform along with 30 other groups called on members of Congress in a letter, dated March 9, to reject any proposal to implement a financial transaction tax.

“An FTT is the latest attempt by the Left to take advantage of a ‘crisis’ to implement a massive new tax on the American people,” the letter states. “Contrary to their rhetoric, this tax would be borne by the American people, not Wall Street. It would punish investment, leading to lower returns for American retirees and savers and increased market volatility.”

In a separate statement Tuesday, Americans for Tax Reform said that “if implemented in any given state, an FTT would result in significant harm to investors. Because the tax would be imposed on transactions processed by the exchanges in a state, it would harm investors across the country, not just those in the state which implements it.”

The bill introduced by McHenry and Huizenga “would protect against this by prohibiting a financial transactions tax on taxpayers outside a state’s borders,” Americans for Tax Reform said.

The Securities Industry and Financial Markets Association added Tuesday in a separate statement that it “commends the action taken today to protect Americans retirement savings” by McHenry and Huizenga.

The bill “would block states from imposing financial transactions taxes (FTTs) on certain industry participants, including stock exchanges and broker-dealers, which would be paid by out-of-state investors when the FTT is passed onto them,” SIFMA said.

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