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Illinois Lawmakers Push for Financial Transactions Tax

Traders Magazine Online News, March 25, 2019

John D'Antona Jr.

In the U.S. there is no taxation without representation. And the much derided financial transaction tax is getting some support from Illinois legislators.

According to a recent report from the Illinois News Network, lawmakers from the “the Prairie State” are proposing legislation that would require a $1 fee on any financial transaction done in the state with the exception of securities held in a retirement account or a transaction involving a mutual fund.

“Beginning January 1, 2020, a tax is imposed on the privilege of engaging in a financial transaction on any of the following exchanges or boards of trade: the Chicago Stock Exchange; the Chicago Mercantile Exchange; the Chicago Board of Trade; or the Chicago Board Options Exchange,” according to the text of the bill. “The tax is imposed at a rate of $1 for each transaction for which the underlying asset is an agricultural product, a financial instruments contract, or an options contract. The tax shall be paid by the trading facility or, in any other case, by the purchaser involved in the transaction.”

Rep. Mary Flowers, D-Chicago

Illinois state Rep. Mary Flowers, D-Chicago, has been a long-time supporter of the state- based tax proposal for years. Flowers has enlisted the help of Matt Harrington, a self-described financial expert, to explain how the financial transactions tax “could help bring prosperity to our economy,” INN reported.

He said the bill would raise billions of dollars a year for the state by reaching not only reach transactions done in Illinois, but also those done by elsewhere by companies that have a footprint in the state.

“We’ve re-written the bill to make sure that even if they have a footprint here and they clear their trades in New Jersey, they will be responsible,” he said to the House Revenue and Finance Committee.

Majority Leader Greg Harris, D-Chicago is a co-sponsor of the legislation.

According to Jim Toes, Chief Executive Officer of the Security Traders Association, this isn’t the first time the equity trading our industry has faced this issue, and while details have yet to unfold, a proposed FTT will most likely espouse the perceived attributes of past versions. Toes said that its low rate and broad based design raises reliable revenue while curbing behavior deemed threatening to our markets perpetuated primarily by propriety trading firms.

“In the end, an FTT is a tax on capital and the savings of individual investors that causes rippling effects detrimental to our nation’s GDP,” Toes said. “While the arguments for opposing FTTs still exist, the conditions and environment under which they will be presented this election cycle are different enough to cause concern.”

Toes explained that a national FTT flaw is that its low rate will not result in a change of behavior by the entity being taxed and thus it should provide a consistent level of revenue.

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