Turns out the “Securing a Strong Retirement Act of 2020” wasn’t the only retirement bill introduced in the House of Representatives on Oct. 27.
Republican leaders of the House Financial Services Committee, Reps. Patrick McHenry (R-NC), and Bill Huizenga (R-MI) introduced new legislation on the same day called the “Protecting Retirement Savers and Everyday Investors Act.” Their bill seeks to protect “everyday investors” who could be forced to pay a state-imposed Financial Transaction Tax (FTT) on their retirement savings including 401ks, pensions and 529 college savings accounts.
But unlike the broader bipartisan retirement reform bill introduced Reps. Richard Neal (D-MA) and Kevin Brady (R-TX) that stole the spotlight last week, McHenry and Huizenga’s bill is decidedly partisan.
Statements from both Congressmen announcing the bill say it was introduced “to protect investors from Democrats’ harmful tax proposals,” but it looks to face an uphill battle in the Democrat-controlled House.
“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,” McHenry said. “This bill will protect the everyday investors who would ultimately pay this additional tax on their hard-earned savings—including in their 401ks, 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.”
N.J. proposal viewed as money-grab
McHenry and Huizenga note that currently, Democrats in the New Jersey state legislature are considering a bill that would impose an FTT on all stock trades that occur in the state, which they say would be effectively paid for primarily by non-New Jersey investors and savers. They point out this would be the only state-level FTT collecting taxes on trades in the United States.
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. The increased cost of trading at these exchanges, the Reps say, will ultimately be passed on to the customers—meaning New Jersey would get tax dollars paid for by savers outside of New Jersey. They also say New Jersey’s proposal is a test-run for a federal FTT.
“No government, whether it’s federal or state, should be making it harder for Americans to save for the future,” Huizenga said. “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,” Huizenga added. “The Protecting Retirement Savers and Everyday Investors Act stops this tax increase, promotes financial security, and protects middle class families across America.”
ARA’s Graff supports new bill
While the bill does have that aforementioned uphill battle in the Democrat-controlled House, the legislation is supported by the American Retirement Association (ARA), Americans for Tax Reform (ATR) and 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 401k participants make less than $100,000 a year,” ARA CEO Brian H. Graff said.
“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,” said Grover G. Norquist, President of Americans for Tax Reform. “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.”
According to a letter of support from Americans for Tax Reform, the New Jersey proposal would impose a tax of between 0.10 and 0.25 cents on trades of stocks, options, and futures. According to a study by Modern Markets Initiative, the New Jersey FTT could cost the state’s investors and 401k plan holders between $200 million and $8 billion.
The “Protecting Retirement Savers and Everyday Investors Act” would stop states and municipalities from imposing the FTT on securities industry participants such as exchanges and broker-dealers.
- EDITOR’S NOTE: Click here for a deeper dive into the ins and outs of a Financial Transaction Tax from the Brookings Institution.
- SEE ALSO: ‘Millionaire Tax’ Coming to N.J.—Will Other States Follow Suit?