Tax Policy

Taxes impact the savings and investment decisions of individuals and corporations and are a necessary means for funding the government.

SIFMA believes reasonable taxation and economic growth are not mutually exclusive and encourages policymakers to consider both when contemplating changes to the tax code. Many of SIFMA’s members are global taxpayers as well, therefore international standards for raising revenue should consider the highly regulated nature of the financial services industry. SIFMA’s member firms are willing and prepared to help policymakers wade through the nuances and goals of their respective tax policy.

SIFMA believes taxes impact savings and investments for both individuals and businesses, but remain necessary for government programs and support for domestic economic growth. We remain focused on international tax, capital gains and dividends as well as protecting investors and savers from taxes that could hurt their future savings.

Capital Gains and Dividends

Dividends are payments made by a corporation to an individual who owns the corporation’s stocks. Investors who receive dividends must pay taxes on them through their personal income taxes. The dividend tax paid by investors is the second time taxes are paid on that income, hence the dividend tax is a double tax. First, a corporation pays taxes on its profits and pays dividends from what remains. Once the dividend is received by an individual, the stockholder pays a second tax on that same money through their person income tax filing.

The U.S. has one of the highest tax burdens on dividends in the world. Of the 25 million tax returns with dividends, 63 percent are from taxpayers age 50 and older, and 68 percent are from returns with incomes less than $100,000. Increasing the dividend tax would make the U.S. system of double taxation on corporate profits and dividends worse and continue to hamper U.S. competitiveness. Increasing the dividend tax does nothing more than disincentivize investments in these dividend-paying companies, which are often the most stable American strongholds that employ union employees, provide health care, and provide pensions for their employees.
Devaluing an investment in these companies would reduce stock prices, ultimately hurting the overall value of companies and continuing to hamper any chance they have at being competitive.

Financial Transaction Tax

A financial transaction tax (FTT) is essentially a sales tax on investors. They tax trades in the amount of a fraction of a percent, and the costs are passed along to investors and savers. Taxing savings and retirement vehicles runs counter to many longstanding policies promoting savings and economic growth, and the negative impact on the world’s most liquid market is of further detriment to all investors.

FTTs in general reduce the return on investment savings and could require many middle- and lower-income citizens to significantly delay their retirement. For example, a Vanguard analysis shows the cost to an individual saving for retirement, who invests $10,000 per year over 40 years in a balanced portfolio of actively managed stocks (60%) and bonds (40%), with a 10-basis point FTT imposed on purchases of securities would be some $36,000—more than 3 ½ years of annual savings. Moreover, in jurisdictions where FTTs have been implemented, they have consistently lowered trading volumes and hurt liquidity.

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