McHenry, Huizenga Introduce New Bill to Protect Americans’ Retirement Savings
October 27, 2020 -
Today, Republican leader of the House Financial Services Committee, Patrick McHenry (NC-10), and Republican leader of the Investor Protection, Entrepreneurship, and Capital Markets Subcommittee, Bill Huizenga (MI-2), introduced new legislation to protect investors from Democrats’ harmful tax proposals. The Protecting Retirement Savers and Everyday Investors Act would prohibit states from imposing a Financial Transaction Tax (FTT) on certain industry participants, which would be paid by out-of-state investors when the FTT is passed onto them. This includes Main Street investors saving for retirement, their first home, or their child’s education.
“Democrats are ignoring the facts. We know the FTT will hurt retirement savers. We know the FTT has been proven unworkable in countries around the world. And we know that New Jersey Democrats’ state-level FTT proposal will be a new tax on savers across the country. This bill will protect the everyday investors who would ultimately pay this additional tax on their hard-earned savings—including in their 401(k)s, pensions, and college-savings accounts. As Democrats continue to push their false claim that the FTT is only a tax on the wealthiest, Republicans will continue to fight for middle-class Americans saving for their future,” said Congressman McHenry.
“No government, whether it’s federal or state, should be making it harder for Americans to save for the future. New Jersey is single handedly penalizing middle class families across America in an attempt to solve its own budget shortfall. New Jersey’s misguided financial transaction tax penalizes those saving for retirement, saving for college, and saving for a down payment on a house. Michiganders and Americans across the nation who are investing and saving for their future should not be forced to pay New Jersey’s transaction tax. The Protecting Retirement Savers and Everyday Investors Act stops this tax increase, promotes financial security, and protects middle class families across America,” said Congressman Huizenga.
“Congressman McHenry and Huizenga should be applauded for their work fighting against the effort by blue states like New Jersey to impose new financial transaction taxes on American investors. FTTs have failed everywhere they have been tried and will harm American investors, savers, and businesses. Financial transaction taxes send the wrong incentive to market participants and Americans for Tax Reform applauds Republican members of the House Financial Services Committee who are working to halt this progressive effort,” said Grover G. Norquist, President of Americans for Tax Reform. Read a letter from Americans for Tax Reform in support of the Protecting Retirement Savers and Everyday Investors Act here.
“As radical state legislatures attempt to institute new taxes on trades made via financial exchanges, the introduction of this important legislation could not have come at a better time. Higher taxes on stock trades will only hurt consumers, businesses, taxpayers, the economic recovery, and American competitiveness. NTU is proud to support legislation that prohibits these particularly harmful state level financial transaction taxes. We look forward to working with Congress to ensure its timely passage into law,” said Thomas Aiello, Policy and Government Affairs Manager for the National Taxpayers Union.
“A financial transaction tax is a tax on the retirement savings of hard working Americans. 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,” said Brian H. Graff, CEO of the American Retirement Association.
What is the Financial Transaction Tax (FTT)?
- Simply put, the FTT is a tax on Americans’ hard-earned retirement savings.
- The FTT is applied each time a financial transaction is conducted. This includes transactions of mutual funds, which 45.5% of U.S. households own, as well as transactions made by other retirement accounts, including pension plans.
- The FTT would be a new, additional tax on top of already-existing income taxes, capital gains taxes, and corporate taxes.
- Democrats’ claims that the FTT would only impact the wealthiest investors are false. FTTs hurt all market participants, including Main Street investors saving for retirement or their child’s education, as well as everyday Americans’ pension funds and savings.
- One study indicates that, with a federal FTT in place, Main Street investors could lose the equivalent of more than three-and-a-half years’ worth of savings over the course of a lifetime to the FTT.
What does the Protecting Retirement Savers and Everyday Investors Act do?
- The Protecting Retirement Savers and Everyday Investors Act would protect savers across the country—including everyday investors, retirees, and pensioners—whose savings would be harmed by the FTT.
- This bill would stop states and municipalities from imposing the FTT on securities industry participants such as exchanges and broker-dealers.
- While the bill prohibits states from imposing this tax on trades by citizens outside of their own borders by taxing the intermediaries those interstate citizens rely upon, it does not prohibit states and localities from imposing FTTs on their own citizens.
Why is this bill needed right now?
- Currently, New Jersey state legislature Democrats are considering a bill that would impose an FTT on all stock trades that occur in New Jersey, which would be effectively paid for primarily by non-New Jersey investors and savers.
- Of note, this would be the only state-level FTT collecting taxes on trades in the United States—further demonstrating the ineffectiveness of this tax.
- This New Jersey tax would capture trades made on the major exchanges based in New York City (e.g., NYSE, NASDAQ) because their trade processing centers are physically located in New Jersey.
- In our technology-driven world where trading can be conducted in the blink of an eye, online, and by investors around the country, New Jersey Democrats are trying to skim off the top from Americans just because exchanges happened to previously set up servers in their state.
- The increased cost of trading at these exchanges will ultimately be passed on to the customers—meaning New Jersey would get tax dollars paid for by savers outside of New Jersey.
- Make no mistake, New Jersey Democrats’ FTT proposal is a test-run for a federal FTT. Numerous Democrat Presidential candidates and Democrats in Congress have proposed the FTT, despite its proven failure across the globe, as a solution to cover their grab-bag of massive new government spending.
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