STA Opposes Transaction Tax Proposal - H.R. 4191

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2 December 2009

On December 3, 2009, Congressman Peter DeFazio (D-OR) introduced H.R. 4191, a bill titled “Let Wall Street Pay for the Restoration of Main Street Act of 2009.” The bill would establish a “securities transaction tax [that] is applied to stock transactions (1/4 of 1 percent (0.25%)), futures (0.02%), swaps (0.02%), credit default swaps (0.02%), and options (at the rate of the underlying asset).”

I strongly oppose this legislation. Its enactment would lead to serious disruptions in the capital markets while burdening “Main Street” with paying the tax.

The authors of the legislation state that is intended to “make it clear to our constituents that we know Main Street is suffering and a restored Wall Street should now share in its recovery with everyone else.” In spite of exemptions for tax-deferred accounts and other specified trading, the incidence of the tax would ultimately impose a significant and open-ended burden on the individuals and businesses that make up “Main Street.” For example, while an individual trader may not accumulate $100,000 in trades annually, an individual investor in a mutual fund will pay this tax as the fund itself will vastly exceed that amount in trading in a year.

What the creators of this bill need to realize is that Wall Street and Main Street are not separate entities. Wall Street helps to build Main Street by raising the capital businesses need to operate and employ “Main Street. The vast majority of main street investors use managed accounts and mutual funds to invest their savings, the fees paid for such services help sustain Wall Street This tax would be passed through to those investors, the very people that the creators of this bill claim they are trying to protect.

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