Last week, various media outlets reported that a conservative think tank had endorsed a financial transactions tax (FTT).
This does not mean an FTT is bipartisan. The FTT is supported by a long-list of far-left politicians. It is opposed by conservatives in Congress and by dozens of organizations and activists.
Progressives including Senator Bernie Sanders (I-Vt.), Representatives Alexandria Ocasio Cortez (D-N.Y.), Ilhan Omar (D-Minn.), Ro Khanna (D-Calif.), and Peter DeFazio (D-Ore.) have called for this new tax, which would be imposed at a rate of 0.1 percent on any buying and selling of stocks, bonds, and other financial instruments.
While they argue that an FTT is needed to reduce market volatility and make Wall Street pay “their fair share,” this tax will actually harm millions of Americans that invest their lifesavings in the stock market and own 401(k)s, pensions, and index funds.
There is strong conservative opposition to an FTT. In fact, there is strong opposition to an FTT among all political leanings.
Republicans on the House Financial Services Committee unanimously oppose an FTT. Members of the committee led by Ranking Member Patrick McHenry (R-NC) released a resolution condemning attempts to impose this new tax. As Rep. McHenry noted this tax would harm Americans saving for retirement, cost jobs, and reduce access to new capital.
The resolution was signed by Reps. McHenry, Frank Lucas (R-Okla.), Bill Posey (R-Fla.), Blaine Luetkemeyer (R-Mo.), Bill Huizenga (R-Mich.), Steve Stivers (R-Ohio), Ann Wagner (R-Mo.), Andy Barr (R-Ky.), Roger Williams (R-Texas), French Hill (R-Ark.), Tom Emmer (R-Minn.), Lee Zeldin (R-N.Y.), Barry Loudermilk (R-Ga.), Alex Mooney (R-W.Va.), Warren Davidson (R-Ohio), Ted Budd (R-NC), David Kustoff (R-Tenn.), Trey Hollingsworth (R-Ind.), Anthony Gonzalez (R-Ohio), John Rose (R-Tenn.), Bryan Steil (R-Wis.), Lance Gooden (R-Texas), William Timmons (R-S.C.), and Van Taylor (R-Texas).
A coalition of 30 conservative & free market organizations recently released a letter opposed to an FTT. The letter was released by ATR and signed by organizations including Americans for Prosperity, Club for Growth, Heritage Action for America, ALEC Action, Citizens Against Government Waste, Competitive Enterprise Institute, National Taxpayers Union, and Taxpayers Protection Alliance.
The letter calls on all members of Congress to reject any proposal to implement a financial transaction tax. As the signatories note, the FTT is the latest attempt by the Left to take advantage of a “crisis” to implement a massive new tax on the American people. 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.
Voters opposes a financial transaction tax by a margin of three-to-one. The U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness conducted a national poll of 2,000 likely voters. According to this data, 63 percent of voters opposed an FTT including 49 percent of voters that were “strongly opposed.” Just 23 percent of voters supported an FTT.
Several Congressional Democrats oppose a financial transaction tax. As reported in Politico, Congressman Gregory Meeks (D-NY) recently argued that an FTT “hurts New Yoek in a big way” because it would cause trading to leave the State.
Similarly, Rep. Bill Foster (D-Ill.) argued that an FTT would reduce trading volumes and fail to raise revenue. He said:
“My suspicion is that when you would actually score something like that, you’d look at the drop in trading volume that would happen and you’d find that the revenue raised would be small.”
His suspicion is correct. The tax simply would not raise the revenue supporters claim it would. This is because it would reduce the volume of transactions, output, and employment. FTTs also cause capital to flee to jurisdictions that do not tax transactions, further reducing revenues. When Italy and France imposed FTTs in 2012, both countries raised less than a quarter of expected revenues.
Further, a study by BlackRock found that a financial transaction tax of 0.1 percent would result in an investor losing $2,300 in returns on a $10,000 investment in a global equity fund over ten years. It would also cut deeply into retirement accounts. A 2021 study conducted by the Modern Markets Initiative found a proposed financial transaction tax would cost $45,000 to $65,000 over the lifetime of a 401(k) account.
Not only would an FTT harm retirees and investors, but it has a long history of failure. FTTs were repealed in Sweden, Spain, the Netherlands, Germany, Norway, Portugal, Italy, Denmark, Japan, Austria, France, and even the United States.
A financial transaction tax is not a “reasonable, bipartisan solution.” It has a long list of opponents, from conservatives to the general public to moderate Democrats.