Tax Policy

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

As expected, tax reform has been a major focus in 2025 as many of the provisions in the 2017 Tax Cuts and Jobs Act (TCJA) were set to expire. Recently, Congress passed H.R. 1, known as the One Big Beautiful Bill Act (OBBB), which permanently extended several expiring individual and business tax provisions, avoiding dramatic tax increases that would have negatively impacted economic growth.

SIFMA believes reasonable taxation and economic growth are not mutually exclusive and encourages policymakers to weigh impacts on growth and competitiveness 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 policies.

Looking forward, we remain focused on international tax, capital gains and dividends, and protecting investors and savers from taxes that could hurt their savings and future retirement security.

The One Big Beautiful Bill Act

On July 4, President Trump signed the OBBB into law. Here is a high-level overview of several key outcomes for the capital markets:

• Section 899: The final version of the bill did not include the newly created Section 899 that had been part of the House-passed package. This section would have increased U.S. tax rates on certain income earned by foreign investors in jurisdictions deemed to impose “unfair foreign taxes” on U.S. persons or entities, including both discriminatory and extraterritorial taxes. Withholding rates could have reached as high as 50%, and created significant compliance and economic challenges for global investors and financial intermediaries.
• Remittances: The original House version included a 3.5% excise tax on all transfers from U.S.-based to foreign accounts. The final bill reduced the rate to 1% and excludes transfers from accounts held with entities subject to the Bank Secrecy Act thereby addressing the unintended impact on non-domiciled investors in U.S. markets.
• Executive Compensation (IRC 162(m)): The legislation did not expand the definition of “covered employees” under Section 162(m), leaving current deductibility limitations unchanged.
• Municipal Bond Tax Exemption: The bill preserves the federal tax exemption for interest paid on municipal bonds.
• Stock Buyback Excise Tax: The excise tax on stock buybacks remains at 1%, with no increase included in the final legislation.
• IRA Tax Credits: Provisions that would have sunset clean energy tax credits under the Inflation Reduction Act were revised to include grandfathering for existing projects such as wind and solar. A proposed new excise tax on those projects was not included in the final bill. This transition relief is important for investors who have committed capital under existing law.
• GILTI (Global Intangible Low-Taxed Income): The final bill modifies interest expense allocation rules so that expenses are no longer attributed to the GILTI basket, representing a structural change to how U.S. multinationals calculate tax on foreign earnings. This has the effect of reducing the overall U.S. tax burden on foreign income and improving the competitiveness of U.S.-based global firms.
• Trump Accounts: The scope of eligible investments for the newly created “Trump accounts” was expanded to permit investment in products that are not composed solely of U.S. companies.
• Pass-Through Entity Tax (PTET): The House-passed language creating a federal PTET was not included in the final bill, preserving the existing treatment of state and local tax deductions for certain pass-through businesses.
• Housing-Related Tax Credits: The bill supports the development of affordable housing—most notably through enhancements to the Low-Income Housing Tax Credit (LIHTC) program including a permanent 12% in the LIHTC allocation and lowering the bond financing threshold from 50% to 25%. It also includes provisions aimed at encouraging investment by making permanent the Opportunity Zone programs and New Markets Tax Credit, with the goal of boosting housing construction and economic revitalization in targeted areas.
• Debt Limit: The legislation also included an extension of the statutory debt ceiling, which was projected to be reached in August absent congressional action.

With the legislative phase now complete, focus will shift to implementation. Several provisions will require clarification or additional guidance during the regulatory process. SIFMA’s tax team and related member committees will remain actively engaged with Treasury and other federal agencies to address remaining issues and advocate for practical implementation approaches that reflect the needs of the capital markets.

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 aged 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 of being competitive.

Competitive Global Tax System

SIFMA believes that lawmakers should seek to allow multinationals to compete for business in foreign markets on a level playing field. Achieving this objective requires an outbound international tax system that minimizes double taxation of foreign branches and controlled foreign corporations. Similarly, lawmakers should promote clarity and certainty for inbound and domestic market participants. This should be accomplished through providing broad-based deductions for ordinary business expenses (with any exceptions limited and well-targeted to address specific abuse); streamlining alternative tax regimes; and avoiding targeted revenue raisers that distort ordinary business decisions.

Financial Transaction Tax

A financial transaction tax (FTT) is essentially a sales tax on investors. FTTs 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.