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Bill to Protect Savers from Financial Transaction Taxes Resurfaces

Legislation

Two Republican members of the House of Representatives have reintroduced legislation that pushes back on state and local efforts to impose harmful financial transaction taxes (FTTs) that would impact non-residents.  

Rep. Patrick McHenry (R-NC), the ranking Republican member of the House Financial Services Committee, and Rep. Bill Huizenga (R-MI), the ranking Republican member of the Investor Protection, Entrepreneurship and Capital Markets Subcommittee, on March 3 reintroduced the Protecting Retirement Savers and Everyday Investors Act.  

In general, the legislation would prohibit states and local municipalities from imposing 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—including Main Street investors.  
Moreover, the bill prohibits states from imposing this tax on trades by citizens who live outside of their borders by taxing the intermediaries those interstate citizens rely upon. It does not prohibit states and localities from imposing FTTs on their own citizens.

“These FTTs would penalize Americans saving for retirement, their first home, or their child’s education, all at a time when they can least afford it,” Rep. McHenry said in a statement. “As we come out of the COVID-19 crisis, we should be expanding everyday investors’ access to our markets, not holding them back from investing in their future.”

“A financial transaction tax is a tax on the retirement savings of hard-working Americans,” stated American Retirement Association CEO Brian Graff. “This bill will prevent this Main Street tax which would otherwise be passed on to middle income earners—two-thirds of 401(k) participants make less than $100,000 a year.”

McHenry and Huizenga further emphasize that Democrats’ claims that an FTT would only impact the wealthiest investors are false. They note that an FTT is applied each time a financial transaction is conducted, including transactions of mutual funds, which 45.5% of U.S. households own, as well as transactions made by other retirement accounts, including pension plans. In addition, they note that an FTT would be a new, additional tax on top of existing income taxes, capital gains taxes and corporate taxes.

“The federal government should not be making it harder for Americans to save for their future,” adds Rep. Huizenga, further noting that, “A financial transaction tax would clearly break President Biden’s promise to not raise taxes on middle class families and would negatively impact retirement savers, pensioners, families saving for college, and everyday investors.”

Their legislation was first introduced last year in response to an effort by the New Jersey state legislature to impose an FTT on high-quantity processors of financial transactions—including those in 401(k) plans—to close the state’s widening budget gap. Other state legislatures, including New York and Illinois, are seeking to address their states’ fiscal problems by imposing an FTT. In early February, the ARA, along with 30 other organizations, wrote to New York State leaders, criticizing a proposal to tax stock transfers as a misguided attempt to address the state’s budget deficit.