![]() These countries are generally doing just fine. It would join the ranks of countries including the United Kingdom, France, Switzerland, Taiwan and Hong Kong. would not be alone in imposing a financial transaction tax. There are a few reasons to think so.įirst, the U.S. Chamber’s Center for Capital Markets Competitiveness, Tom Quaadman, said in a statement, “A Financial Transaction Tax will increase the cost of capital, decrease investment, harm businesses and hurt Americans who are saving and investing.” Treasury Secretary Steven Mnuchin said at a hearing in December that he was “very concerned that would destroy our capital markets.” Other industry opponents assume the tax is a political nonstarter, and so have not taken the prospect seriously.ĭespite this handwringing, a financial transaction tax is unlikely to change much for most Americans. The executive vice president for the U.S. Chamber of Commerce claims it will hurt returns for individual investors and drive up the cost of home mortgages. The Investment Company Institute argued that most small investors use mutual funds, and they will face major cost increases because of this tax. Predictably, some industry insiders have been quick to make dire forecasts for the potential results. Sanders’ plan includes different rates for particular transactions, taxing stock trades at 0.5%, bond trades at 0.1% and derivative trades at 0.005%. Bloomberg, Warren, Buttigieg and Yang favored setting the tax at 0.1%. Proposals vary, but the suggested tax level is usually low. But overall, a financial transaction tax means the government gets a cut of every trade, maybe with a few exceptions such as initial public offerings. The details for derivatives are a little more complicated than for stocks and bonds. Every time someone sells a stock, bond or derivative, the government would impose a tax on the transaction. The exact mechanisms proposed vary, but a plan introduced in the Senate in late 2019 suggests a basic framework. ![]() ![]() The basic theory behind a financial transaction tax, sometimes abbreviated as “FTT,” is that every stock market transaction should kick a little back to Uncle Sam. Even former Vice President Joe Biden seems to be open to the idea. Elizabeth Warren, Pete Buttigieg and Andrew Yang were also in favor of the approach. Bernie Sanders of Vermont expressed his support for a financial transaction tax as far back as his 2016 presidential run. Former presidential hopeful Michael Bloomberg jumped on the financial transaction tax bandwagon most recently in February. In the 2020 race, the financial transaction tax gained traction among candidates positioning themselves as moderates and those embracing the party’s left wing. Current and former candidates for the Democratic presidential nomination have expressed support for a “financial transaction tax.” As election year tax policy promises go, it is not one worth losing sleep over – regardless of the naysayers’ doomsday predictions.
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