It would harm all investors, especially middle-income American workers saving for retirement. Quite frankly, an FTT is a terrible idea. A drop in liquidity is bad for fund shareholders. As mutual fund investors we rely on having liquidity, he added. McKeon’s bill was the subject of an October 2020 hearing held by the New Jersey Assembly Financial Institutions and Insurance Committee, where witnesses voiced strong opposition to the proposed FTT. When you put a tax on transactions, you risk damaging liquidity. McKeon notes that there are reportedly billions of financial transactions processed daily, with many of those processed in New Jersey.īut even though the tax would be levied on the processor, it could be passed along to the purchaser or seller, therefore raising billions of dollars in revenue annually for New Jersey, according to the bill’s summary.įor purposes of the tax, financial transactions would be defined as those involving the purchase or sale of a financial security, which would include a futures contract, options contract, futures option contract, swap contract, credit default swap contract, derivative or share of stock in an entity.Īnd like the previous version of the legislation, the bill as currently drafted does not make any exception for retirement plan investments, including participants in 401(k) plans and other plans that invest in the markets. High-quantity processors would be defined as persons or entities that process 10,000 or more financial transactions through electronic infrastructure located in New Jersey during the year. The tax would be $0.0025 for each financial transaction processed. 11 to impose a tax on high-quantity processors of financial transactions. taxpayer (whether a corporation, partnership, citizen, or resident).After dying in 2020, a proposal to tax financial transactions-including those in 401(k) plans-is once again before the Garden State’s legislature.ĭuring the start of the New Jersey legislative session this week, Assemblyman John McKeon (D-Essex and Morris) reintroduced legislation (A1757) on Jan. It would be imposed on transactions that occurred within the United States and on transactions that took place outside of the country and involved at least one U.S. The tax would not apply to the initial issuance of stock or debt securities, transactions of debt obligations with fixed maturities of no more than 100 days, or currency transactions (although transactions involving currency derivatives would be taxed). FTTs are not new and are applied by various countries, including some EU Member States, such as France, Italy and Spain. For purchases of derivatives, the tax would be 0.1 percent of all payments actually made under the terms of the contract, including the price paid when the contract was written, any periodic payments, and any amount to be paid when the contract expires. FTT stands for ‘financial transaction tax’ and is a generic name for taxes that are levied on transactions such as sale and purchase, that involve some sort of financial element such as currencies or stocks and shares. For purchases of stocks, bonds, and other debt obligations, the tax generally would be 0.1 percent of the value of the security. This option would impose a tax on the purchase of most securities and on transactions involving derivatives (contracts requiring one or more payments that are calculated by reference to the change in an observable variable). However, the Securities and Exchange Commission charges a fee of approximately 0.002 percent on most transactions.

Under current federal tax law, no tax is imposed on the purchase of securities (stocks and bonds) or other financial products. The United States is home to large financial markets with a lot of daily trading.

Financial transaction tax