Overview
Concerns about volatile financial markets and the search for new sources of federal revenue have spurred interest among lawmakers and other commentators in imposing new taxes on securities transactions. Generally, a “financial transaction tax” (also known as a “securities transaction tax”) could apply to the value of trades in stocks, bonds, mutual funds, exchange-traded funds (ETFs), futures and options, other derivative instruments, and other securities.
While a financial transaction tax can be structured in a variety of ways, ICI believes that any such tax could harm individual fund investors who are investing to meet retirement, education, and other financial goals.
For fund investors, a financial transaction tax would raise the cost of trades that a fund makes for its portfolio and would depress fund returns. Depending on how the tax is structured, it could subject mutual fund and ETF shareholders to double taxation—for example, if the tax is collected both on trades in fund shares and on stock trades that mutual funds routinely engage in to invest shareholder cash, meet shareholder redemptions, and adjust fund portfolios. If the tax is applied to shares in money market funds, it would place a heavy burden on their shareholders, many of whom buy and sell shares frequently because they use these funds as transaction accounts.
Some financial transaction tax proposals have tried to exempt individual fund investors. However, no matter how it is structured, such a tax could harm individual fund investors and could create market distortions that would reduce the efficiency of markets for all participants—including fund investors—by reducing market volumes, impairing liquidity, and distorting price discovery.
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News & Publications
News & Publications
“Wall Street Tax Act” Will Land on Main Street Investors
“Wall Street Tax Act” Will Land on Main Street Investors By Paul Schott Stevens (As published in InvestmentNews , April 11, 2019) Last month, Senator Brian Schatz (D-HI) and Representative Peter DeFazio (D-OR) introduced the Wall Street Tax Act in the Senate and the House, respectively. The bill would level a tax of 10 basis points (or 0.1 percent) on the value of the securities transferred in financial transactions. The bill's sponsors herald it as "a new progressive tax" to raise revenue, address economic inequality, and reduce market volatility. But the reality is that a financial...
ICI Statement: Financial Transaction Tax Is Bad for Investors, Markets, Economy
ICI Statement: Financial Transaction Tax Is Bad for Investors, Markets, Economy Washington, DC, March 1, 2013 - ICI President and CEO Paul Schott Stevens issued the following statement in response to the financial transaction tax legislation introduced by Senator Tom Harkin (D-IA) and Representative Peter DeFazio (D-OR): “A financial transaction tax is bad policy that substantially reduces the investment returns of fund investors and retirement savers. Whether introduced in the United States, Europe, or elsewhere, financial transaction taxes slow economic growth, drive away financial activity...
Financial Transaction Tax: Taxing U.S. Investment, Savings, and Growth
“Financial Transaction Tax: Taxing U.S. Investment, Savings, and Growth” Center for Capital Markets Competitiveness U.S. Chamber of Commerce Remarks by Paul Schott Stevens President and CEO Investment Company Institute Wednesday, December 16, 2009 Washington, DC Thank you, David [Hirschman], and thank you to the Chamber for sponsoring this event. There’s been a lot of populist rhetoric around this idea of “making Wall Street pay,” and it’s vital that we educate the public on the issue. The Chamber is doing a great service by hosting this discussion. In my brief time, I want to make four points...