Impose a Tax on Financial Transactions

CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.

Billions of Dollars 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2021–
Change in Revenues -43.3 20.4 67.4 90.1 98.0 99.0 101.1 103.9 106.5 109.0 232.6 751.9

Data source: Staff of the Joint Committee on Taxation.
This option would take effect in January 2022, although some changes to revenues would occur earlier because of an immediate reduction in the value of financial assets.
An offset to reflect reduced income and payroll taxes has been applied to the estimates in this table.

The United States is home to large financial markets with a lot of daily trading. Under current federal tax law, no tax is imposed on the purchase of securities (stocks and bonds) or other financial products. However, the Securities and Exchange Commission charges a fee of approximately 0.002 percent on most transactions.

This option would impose a tax on the purchase of most securities and on transactions involving derivatives (contracts requiring one or more payments that are calculated by reference to the change in an observable variable). For purchases of stocks, bonds, and other debt obligations, the tax generally would be 0.1 percent of the value of the security. For purchases of derivatives, the tax would be 0.1 percent of all payments actually made under the terms of the contract, including the price paid when the contract was written, any periodic payments, and any amount to be paid when the contract expires. The tax would not apply to the initial issuance of stock or debt securities, transactions of debt obligations with fixed maturities of no more than 100 days, or currency transactions (although transactions involving currency derivatives would be taxed). It would be imposed on transactions that occurred within the United States and on transactions that took place outside of the country and involved at least one U.S. taxpayer (whether a corporation, partnership, citizen, or resident).