Republicans Hope To Secure Reduction Of America's Tiny Tax On Share Trading

Mike Godfrey, Tax-news.com, Washington

21 March 2001

US politicians were due yesterday to introduce legislation into the US House of Representatives which aims to reduce the fees on share trading that have been collected by the US Securities and Exchange Commission (SEC) for the past 70 years.

The tax on investors is not well-known and though it may be tiny - one three hundredth of one per cent - it is levied on each share traded anywhere in the US, raking in around US$9bn for the US government in the last ten years or so.

One of the Republican Congressmen heading up the drive to get the tax reduced is Vito Fossella of New York. He and other Congresmen want the Section 31 fee and two other fees on share trading to be reduced. Mr Fossella was quoted in the press as saying: 'These fees hinder productivity, limit investment, reduce the efficiency of the markets and restrain economic growth. Over time, they have grown into a massive tax on investors and capital.'

The government certainly does well out of investors, being as it is on course to collect around US$2.5bn this year alone from the aforementioned fees. Adding weight to the Republican push for their reduction is the fact that the government doesn't actually need so much cash to keep the SEC ticking over, now that trading on the stock exchange has become such a norm and generates large revenues in itself.

The Financial Post quoted Hardwick Simmons, chief executive officer of the Nasdaq, who told Congress last month: 'Dramatic increases in stock market volume in recent years have resulted in tremendous surpluses that go well beyond the original intent of Congress..... In fiscal year 2000, the SEC collected US$2.27bn but had a budget of only US$375m......in short, these surplus fees constitute a tax on savings and investment that effectively lower the returns of every investor who buy stocks, either directly or through a mutual fund or retirement vehicle.'

Mr Fonsella added: 'Reducing them will help to strengthen America's economy and expand opportunity throughout the nation. It will also help investors and entrepreneurs while promoting economic growth and the creation of wealth.'

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