Home Securities Transaction Tax Resource Center
Concerns about volatile financial markets and the search for new sources of federal revenue have spurred interest among lawmakers and other commentators in imposing new taxes on securities transactions. Generally, a “securities transaction tax” (also known as “financial transaction taxes”) could apply to the value of trades in stocks, bonds, mutual funds, exchange-traded funds (ETFs), futures and options, other derivative instruments, and other securities.
While a securities transaction tax can be structured in a variety of ways, ICI believes that any such tax could harm individual fund investors who are investing to meet retirement, education, and other financial goals.
For fund investors, a securities transaction tax would raise the cost of trades that a fund makes for its portfolio and would depress fund returns. Depending on how the tax is structured, it could subject mutual fund and ETF shareholders to double taxation—for example, if the tax is collected both on trades in fund shares and on stock trades that mutual funds routinely engage in to invest shareholder cash, meet shareholder redemptions, and adjust fund portfolios. If the tax is applied to shares in money market funds, it would place a heavy burden on their shareholders, many of whom buy and sell shares frequently because they use these funds as transaction accounts.
Some securities transaction tax proposals have tried to exempt individual fund investors. However, no matter how it is structured, such a tax could harm individual fund investors and could create market distortions that would reduce the efficiency of markets for all participants—including fund investors—by reducing market volumes, impairing liquidity, and distorting price discovery.
ICI research also demonstrates that past proposals would have imposed a securities transaction tax that is several times greater than any tax ever imposed on stock transfers in the U.S.
This page provides information, analysis, and resources on securities transaction taxes from ICI and other sources.
ICI Resources on Securities Transaction Taxes
- The Extraordinarily Extraterritorial Proposal to Tax Global Financial Transactions
- Individual Investors Will Be Harmed by Financial Transaction Taxes
- Financial Transaction Taxes Harm Small Investors and the Economy (pdf) Feb 26, 2013
- Frequently Asked Questions on Securities Transaction Taxes Apr 19, 2012
- ICI/Coalition Letter Opposing Financial Transaction Tax (pdf) Sep 22, 2011
- Fact Sheet: Proposed Securities Transaction Tax is Far Greater than Any in U.S. History Feb 2, 2010
- ICI Research and Background on Transaction Tax Dec 16, 2009
- Financial Transaction Tax: Taxing U.S. Investment, Savings, and Growth Dec 16, 2009
- Members of Congress Express Bipartisan Opposition to Proposed Stock Transfer Tax (pdf) Dec 15, 2009
- ICI: H.R. 4191's Securities Transaction Tax Would Impose Substantial Costs on Middle-Class Fund Investors Dec 4, 2009
- H.R. 4191, the "Let Wall Street Pay for the Restoration of Main Street Act" (pdf) Dec 3, 2009
- ICI Response to Congressional "Dear Colleague" Letter Proposing Securities Transaction Tax Nov 19, 2009
- ICI: Impact of a Securities Transaction Tax on Fund Investors Nov 18, 2009
Other Resources & Commentary
- Commentary: Don't Enact Financial Transaction Taxes, The Hill Dec 20, 2012
- Commentary: Beware of the Taxman, Institutional Investor Jan 29, 2010
- Commentary: Why Taxing Stock Trades Is a Really Bad Idea, Wall Street Journal (op-ed) Jan 5, 2010
- Commentary: A Transaction Tax Would Hurt All Investors, Wall Street Journal (op-ed) Dec 8, 2009
- Transaction Tax and Stock Market Behavior: Evidence from an Emerging Market, Empirical Economics Apr 5, 2006
- The Effects of the Stock Transaction Tax on the Stock Market – Experiences from Asian Markets, Pacific-Basin Finance Journal Dec 1, 1998
- Securities Transaction Taxes: An Overview of Costs, Benefits, and Unresolved Questions, Financial Analysts Journal Sep 1993