Tax on Wall Street Speculation Act
Bill: H.R.2735 | Sponsor: Rep. Lee, Barbara (D-CA)
Policy area: Taxation

Summary:
Tax on Wall Street Speculation Act
This bill imposes an excise tax on the transfer of ownership in certain securities (covered transaction), including any share of stock in a corporation; any partnership or beneficial interest in a partnership or trust; any note, bond, debenture, or other evidence of indebtedness (excluding tax-exempt municipal bonds); and derivative financial instruments.
The bill includes exceptions for initial issues, certain traded short-term indebtedness, and securities lending arrangements.
The bill also (1) imposes a penalty on taxpayers who fail to include a covered transaction on their tax return or information statement, and (2) allows an individual taxpayer whose modified adjusted gross income does not exceed $50,000 ($75,000 for married taxpayers filing joint returns) a tax credit for the amount of tax paid on covered transactions.

To impose a tax on certain trading transactions to invest in our 
     families and communities, improve our infrastructure and our 
environment, strengthen our financial security, expand opportunity and 
                       reduce market volatility.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Tax on Wall Street Speculation 
Act''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) The global financial crisis cost Americans $19 trillion 
        in lost wealth.
            (2) The global financial crisis was caused by financial 
        firms taking great financial risks without disclosing those 
        risks to their investors or their regulators, and by regulatory 
        failures to adequately police the financial services markets 
        for crime, unfair or deceptive practices, fraud, lack of 
        transparency, and mismanagement.
            (3) Deceptive, illegal, and speculative financial practices 
        have harmed public confidence in the integrity and fairness of 
        many United States financial institutions, and threaten the 
        basic strengths of the United States economic system.
            (4) American citizens provided the money to stabilize the 
        financial sector, making $700 billion available to 800 
        financial institutions, automakers, and insurance companies.
            (5) The global financial crisis, along with the wars, 
        unabated and unaddressed climate change, unsustainable tax 
        cuts, and a continuing unemployment crisis, if unaddressed, 
        will deprive a generation of a meaningful role in the larger 
        economy.
            (6) Nurses, teachers, public safety officers, and other 
        public sector workers have faced drastic funding cuts, harming 
        our long-term public safety and prospects for economic growth.
            (7) Extreme weather events rooted in climate change, 
        including flood, drought, fire, super storms like Sandy, as 
        well as ``slow-onset'' events like sea level rise, are wreaking 
        havoc in the United States and across the globe resulting in 
        climate change impacts that jeopardize the lives and 
        livelihoods of Americans, causing large-scale food and energy 
        insecurity in developing countries, and extolling untold 
        economic costs.
            (8) According to economists, a small tax on transfer of 
        ownership of every financial trade could generate hundreds of 
        billions annually in revenue, which when invested could help 
        create millions of good-paying jobs in both the public and 
        private sectors every year, as well as provide urgently needed 
        funding for programs to combat climate change and address 
        global health and development issues.
            (9) A transactions tax will help limit high frequency 
        trading which may be as high as 70 percent of the market and 
        results in declining market stability through extreme price 
        volatility, distorted market prices, and structural 
        vulnerability to speculation far in excess of the liquidity 
        needs of commercial hedgers.
            (10) A securities transfer tax would have a negligible 
        impact on the average investor.
            (11) The United States had a transfer tax from 1914 to 
        1966: The Revenue Act of 1914 (Act of Oct. 22, 1914 (ch. 331, 
        38 Stat. 745)) levied a 0.02 percent tax on all sales or 
        transfers of stock which was doubled in 1932 to help overcome 
        the budgetary challenges during the Great Depression.
            (12) Forty nations have or have had some form of a 
        financial transactions tax; it is endorsed by more than 1,000 
        economists; and 10 European countries are moving forward on 
        implementing a coordinated financial transactions tax after 
        European Union finance ministers signaled approval in January 
        2013.
            (13) Revenue generated by this tax could be available to--
                    (A) create a more dynamic economy and enhance 
                economic opportunity by providing free college 
                education and lessening student debt;
                    (B) strengthen financial security and expand 
                opportunity for low- and moderate-income families, 
                including strengthening the social safety net and 
                expanding resources for child care, Social Security, 
                and savings incentives;
                    (C) expand resources for State and Federal 
                investments that protect our health and environment, 
                investing in water and wastewater infrastructure, 
                rebuild our crumbling physical infrastructure, and 
                create good paying jobs by--
                            (i) expanding and improving Medicare and 
                        Medicaid;
                            (ii) investing in job training, public 
                        sector jobs, and green jobs;
                            (iii) providing housing assistance to low-
                        income households;
                            (iv) investing in transportation including 
                        public mass transit and an infrastructure bank 
                        that promotes environmentally responsible 
                        domestic manufacturing and construction 
                        industries; and
                            (v) protecting our environment and building 
                        a clean energy economy, including efforts to 
                        combat climate change and build resilience to 
                        its effects in the United States and in 
                        developing countries; and
                    (D) fund international sustainable prosperity 
                programs such as HIV treatment, research and prevention 
                programs, other international health and humanitarian 
                assistance, and climate change adaptation and 
                mitigation efforts by developing countries.

SEC. 3. TRANSACTION TAX.

    (a) In General.--Chapter 36 of the Internal Revenue Code of 1986 is 
amended by inserting after subchapter B the following new subchapter:

              ``Subchapter C--Tax on Trading Transactions

``Sec. 4475. Tax on trading transactions.

``SEC. 4475. TAX ON TRADING TRANSACTIONS.

    ``(a) Imposition of Tax.--There is hereby imposed a tax on the 
transfer of ownership in each covered transaction with respect to any 
security.
    ``(b) Rate of Tax.--The tax imposed under subsection (a) with 
respect to any covered transaction shall be the applicable percentage 
of the specified base amount with respect to such covered transaction. 
The applicable percentage shall be--
            ``(1) 0.5 percent in the case of a security described in 
        subparagraph (A) or (B) of subsection (e)(1),
            ``(2) 0.10 percent in the case of a security described in 
        subparagraph (C) of such subsection, and
            ``(3) 0.005 percent in the case of a security described in 
        subparagraph (D) of such subsection.
    ``(c) Specified Base Amount.--For purposes of this section, the 
term `specified base amount' means--
            ``(1) except as provided in paragraph (2)--
                    ``(A) in the case of any security described in 
                subparagraph (A), (B), or (C) of subsection (e)(1), the 
                fair market value of the security (determined as of the 
                time of the covered transaction), and
                    ``(B) in the case of any security described in 
                subparagraph (D) of such subsection, the fair market 
                value of the underlying investment with respect to such 
                security (determined as of the time of the covered 
                transaction), and
            ``(2) in the case of any payment described in subsection 
        (h), the amount of such payment.
    ``(d) Covered Transaction.--For purposes of this section, the term 
`covered transaction' means--
            ``(1) except as provided in paragraph (2), any purchase 
        if--
                    ``(A) such purchase occurs or is cleared on a 
                facility located in the United States, or
                    ``(B) the purchaser or seller is a United States 
                person, and
            ``(2) any transaction with respect to a security described 
        in subparagraph (D) of subsection (e)(1), if--
                    ``(A) such security is traded or cleared on a 
                facility located in the United States, or
                    ``(B) any party with rights under such security is 
                a United States person.
    ``(e) Security and Other Definitions.--For purposes of this 
section--
            ``(1) Security.--The term `security' means--
                    ``(A) any share of stock in a corporation,
                    ``(B) any partnership or beneficial ownership 
                interest in a partnership or trust,
                    ``(C) any note, bond, debenture, or other evidence 
                of indebtedness, other than a State or local bond the 
                interest of which is excluded from gross income under 
                section 103(a), and
                    ``(D) any derivative.
            ``(2) Derivative.--The term `derivative' means any contract 
        (including any option, forward contract, futures contract, 
        short position, swap, or similar contract) the value of which, 
        or any payment or other transfer with respect to which, is 
        (directly or indirectly) determined by reference to one or more 
        of the following:
                    ``(A) Any share of stock in a corporation.
                    ``(B) Any partnership or beneficial ownership 
                interest in a partnership or trust.
                    ``(C) Any evidence of indebtedness.
                    ``(D) Any real property.
                    ``(E) Any commodity which is actively traded 
                (within the meaning of section 1092(c)(4)).
                    ``(F) Any currency.
                    ``(G) Any rate, price, amount, index, formula, or 
                algorithm.
                    ``(H) Any other item as the Secretary may 
                prescribe.
        Except as provided in regulations prescribed by the Secretary 
        to prevent the avoidance of the purposes of this section, such 
        term shall not include any item described in subparagraphs (A) 
        through (H).
            ``(3) Underlying investment.--The term `underlying 
        investment' means, with respect to any derivative, any item--
                    ``(A) which is described in any of the 
                subparagraphs (A) through (H) of paragraph (2) (or any 
                item substantially the same as any such item), and
                    ``(B) by reference to which the value of the 
                derivative, or any payment or other transfer with 
                respect to the derivative, is determined either 
                directly or indirectly.
            ``(4) Treatment of exchanges.--
                    ``(A) In general.--An exchange shall be treated as 
                the sale of the property transferred and a purchase of 
                the property received by each party to the exchange.
                    ``(B) Certain deemed exchanges.--In the case of a 
                distribution treated as an exchange for stock under 
                section 302 or 331, the corporation making such 
                distribution shall be treated as having purchased such 
                stock for purposes of this section.
    ``(f) Exceptions.--
            ``(1) Exception for initial issues.--No tax shall be 
        imposed under subsection (a) on any covered transaction with 
        respect to the initial issuance of any security described in 
        subparagraph (A), (B), or (C) of subsection (e)(1).
            ``(2) Exception for certain traded short-term 
        indebtedness.--A note, bond, debenture, or other evidence of 
        indebtedness which--
                    ``(A) is traded on a trading facility located in 
                the United States, and
                    ``(B) has a fixed maturity of not more than 60 
                days,
        shall not be treated as described in subsection (e)(1)(C).
            ``(3) Exception for securities lending arrangements.--No 
        tax shall be imposed under subsection (a) on any covered 
        transaction with respect to which gain or loss is not 
        recognized by reason of section 1058.
    ``(g) By Whom Paid.--
            ``(1) In general.--The tax imposed by this section shall be 
        paid by--
                    ``(A) in the case of a transaction which occurs or 
                is cleared on a facility located in the United States, 
                such facility, and
                    ``(B) in the case of a purchase not described in 
                subparagraph (A) which is executed by a broker (as 
                defined in section 6045(c)(1)), the broker.
            ``(2) Special rules for direct, etc., transactions.--In the 
        case of any transaction to which paragraph (1) does not apply, 
        the tax imposed by this section shall be paid by--
                    ``(A) in the case of a transaction described in 
                subsection (d)(1)--
                            ``(i) the purchaser if the purchaser is a 
                        United States person, and
                            ``(ii) the seller if the purchaser is not a 
                        United States person, and
                    ``(B) in the case of a transaction described in 
                subsection (d)(2)--
                            ``(i) the payor if the payor is a United 
                        States person, and
                            ``(ii) the payee if the payor is not a 
                        United States person.
    ``(h) Certain Payments Treated as Separate Transactions.--Except as 
otherwise provided by the Secretary, any payment with respect to a 
security described in subparagraph (D) of subsection (e)(1) shall be 
treated as a separate transaction for purposes of this section, 
including--
            ``(1) any net initial payment, net final or terminating 
        payment, or net periodical payment with respect to a notional 
        principal contract (or similar financial instrument),
            ``(2) any payment with respect to any forward contract (or 
        similar financial instrument), and
            ``(3) any premium paid with respect to any option (or 
        similar financial instrument).
    ``(i) Administration.--The Secretary shall carry out this section 
in consultation with the Securities and Exchange Commission and the 
Commodity Futures Trading Commission.
    ``(j) Guidance; Regulations.--The Secretary shall--
            ``(1) provide guidance regarding such information reporting 
        concerning covered transactions as the Secretary deems 
        appropriate, including reporting by the payor of the tax in 
        cases where the payor is not the purchaser, and
            ``(2) prescribe such regulations as are necessary or 
        appropriate to prevent avoidance of the purposes of this 
        section, including the use of non-United States persons in such 
        transactions.
    ``(k) Whistleblowers.--See section 7623 for provisions relating to 
whistleblowers.''.
    (b) Penalty for Failure To Include Covered Transaction Information 
With Return.--Part I of subchapter B of chapter 68 of the Internal 
Revenue Code of 1986 is amended by inserting after section 6707A the 
following new section:

``SEC. 6707B. PENALTY FOR FAILURE TO INCLUDE COVERED TRANSACTION 
              INFORMATION WITH RETURN.

    ``(a) Imposition of Penalty.--Any person who fails to include on 
any return or statement any information with respect to a covered 
transaction which is required pursuant to section 4475(j)(1) to be 
included with such return or statement shall pay a penalty in the 
amount determined under subsection (b).
    ``(b) Amount of Penalty.--Except as otherwise provided in this 
subsection, the amount of the penalty under subsection (a) with respect 
to any covered transaction shall be determined by the Secretary.
    ``(c) Covered Transaction.--For purposes of this section, the term 
`covered transaction' has the meaning given such term by section 
4475(d).
    ``(d) Authority To Rescind Penalty.--
            ``(1) In general.--The Commissioner of Internal Revenue may 
        rescind all or any portion of any penalty imposed by this 
        section with respect to any violation if rescinding the penalty 
        would promote compliance with the requirements of this title 
        and effective tax administration.
            ``(2) No judicial appeal.--Notwithstanding any other 
        provision of law, any determination under this subsection may 
        not be reviewed in any judicial proceeding.
            ``(3) Records.--If a penalty is rescinded under paragraph 
        (1), the Commissioner shall place in the file in the Office of 
        the Commissioner the opinion of the Commissioner with respect 
        to the determination, including--
                    ``(A) a statement of the facts and circumstances 
                relating to the violation,
                    ``(B) the reasons for the rescission, and
                    ``(C) the amount of the penalty rescinded.
    ``(e) Coordination With Other Penalties.--The penalty imposed by 
this section shall be in addition to any other penalty imposed by this 
title.''.
    (c) Clerical Amendments.--
            (1) The table of sections for part I of subchapter B of 
        chapter 68 of such Code is amended by inserting after item 
        relating to section 6707A the following new item:

``Sec. 6707B. Penalty for failure to include covered transaction 
                            information with return.''.
            (2) The table of subchapters for chapter 36 of the Internal 
        Revenue Code of 1986 is amended by inserting after the item 
        relating to subchapter B the following new item:

             ``subchapter c. tax on trading transactions''.

    (d) Effective Date.--The amendments made by this section shall 
apply to transactions after December 31, 2021.

SEC. 4. OFFSETTING CREDIT FOR FINANCIAL TRANSACTION TAX.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 25D the following new section:

``SEC. 25E. FINANCIAL TRANSACTION TAX PAYMENTS.

    ``(a) Allowance of Credit.--In the case of an eligible individual, 
there shall be allowed as a credit against the tax imposed by this 
chapter for the taxable year an amount equal to the tax paid during the 
taxable year under section 4475 with respect to any covered transaction 
in which the taxpayer is a beneficial owner of the security transferred 
in such covered transaction.
    ``(b) Special Rule.--If the tax imposed under section 4475(a) with 
respect to any covered transaction is paid by any person other than 1 
or more beneficial owners of the security transferred in such covered 
transaction, the determination for how such tax is allocated to such 
beneficial owners shall be made in a reasonable manner not inconsistent 
with regulations or other guidance prescribed by the Secretary.
    ``(c) Limitation Based on Modified Adjusted Gross Income.--
            ``(1) In general.--Subsection (a) shall not apply to a 
        taxpayer for the taxable year if the modified adjusted gross 
        income of the taxpayer for the taxable year exceeds $50,000 
        ($75,000 in the case of a joint return and one-half of such 
        amount in the case of a married individual filing a separate 
        return).
            ``(2) Modified adjusted gross income.--For purposes of 
        paragraph (1), the term `modified adjusted gross income' means 
        adjusted gross income--
                    ``(A) determined without regard to sections 86, 
                893, 911, 931, and 933, and
                    ``(B) increased by the amount of interest received 
                or accrued by the taxpayer during the taxable year 
                which is exempt from tax.
            ``(3) Inflation adjustment.--
                    ``(A) In general.--In the case of any taxable year 
                beginning after 2022, each dollar amount referred to in 
                paragraph (1) shall be increased by an amount equal 
                to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section (1)(f)(3) of the 
                        Internal Revenue Code of 1986 for the calendar 
                        year in which the taxable year begins, by 
                        substituting `2021' for `2016' in subparagraph 
                        (A)(ii) thereof.
                    ``(B) Rounding.--If any amount as adjusted under 
                subparagraph (A) is not a multiple of $50, such amount 
                shall be rounded to the nearest multiple of $50.
    ``(d) Eligible Individual.--
            ``(1) In general.--The term `eligible individual' means, 
        with respect to any taxable year, an individual who--
                    ``(A) has attained the age of 18 as of the last day 
                of such taxable year, and
                    ``(B) is a citizen or lawful permanent resident 
                (within the meaning of section 7701(b)(6)) as of the 
                last day of such taxable year.
            ``(2) Certain individuals not eligible.--For purposes of 
        paragraph (1), an individual described in any of the following 
        provisions of this title for the preceding taxable year shall 
        not be treated as an eligible individual for the taxable year:
                    ``(A) An individual who is a student (as defined in 
                section 152(f)(2)) for the taxable year or the 
                immediately preceding taxable year.
                    ``(B) An individual who is a taxpayer described in 
                subsection (c), (d), or (e) of section 6402 for the 
                immediately preceding taxable year.''.
    (b) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 of such Code is amended by 
inserting after the item relating to section 25D the following new 
item:

``Sec. 25E. Financial transaction tax payments.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2021.
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