Educate policymakers about the negative consequences of a financial transaction tax for investors, jobs, and the economy
MFA continues to emphasize the negative consequences of a financial transactions tax (FTT), which would — if enacted — reduce liquidity and asset values for all investors, increase the cost of credit to businesses, and reduce U.S. and European economic growth. An FTT would impair the efficiency of capital formation and hurt the investors and retirees who rely on well-functioning markets.
Legislative proposals for a financial transaction tax (FTT) were introduced in the U.S. in 2019 that apply to stocks, bonds, and derivatives traded in the U.S. or if a U.S. person is a party to the transaction and have narrow exclusions.
An FTT is unlikely to raise substantial revenues and market participants will instead turn to financial instruments not subject to the tax or trade in jurisdictions not subject to the tax. An FTT would also negatively impact the value of financial assets, to the detriment of all investors, including retail investors and pension plans, as the value of the asset would have to reflect the additional cost imposed by the tax. Additionally, the implementation of an FTT would likely decrease liquidity in the markets due to fewer transactions, leading to wider bid-ask spreads which harms investors. Several other countries including Sweden, Italy, and France have experimented with an FTT with dismal results including reduced trading volume, increased volatility, and estimated revenues plummeting after implementation.