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Mnuchin expresses concerns about proposed taxes on financial trades

Mnuchin expresses concerns about proposed taxes on financial trades
© Aaron Schwartz

Treasury Secretary Steven MnuchinSteven MnuchinThe Hill's Morning Report - Biden argues for legislative patience, urgent action amid crisis On The Money: Senate confirms Yellen as first female Treasury secretary | Biden says he's open to tighter income limits for stimulus checks | Administration will look to expedite getting Tubman on bill Senate confirms Yellen as first female Treasury secretary MORE on Thursday said he has a number of worries about financial transaction taxes (FTTs) — taxes on Wall Street trades that are being proposed by progressive Democratic lawmakers and presidential candidates.

"I am very concerned that that would destroy our capital markets, and the cost to American holders of mutual funds would bear the majority of the cost," Mnuchin said at a House Financial Services Committee hearing.

Progressives, including Democratic presidential candidates Sens. Bernie SandersBernie SandersWhat the shift in Senate control means for marijuana policy reform Business groups prepare for lobbying push against minimum wage Schumer: Senate could pave way for reconciliation on COVID relief next week MORE (I-Vt.) and Elizabeth WarrenElizabeth WarrenThe Hill's Morning Report - Biden argues for legislative patience, urgent action amid crisis Financial firms brace for Biden's consumer agency chief Tim Ryan says he's 'looking seriously' at running for Portman's Senate seat MORE (D-Mass.), have called for small taxes on trades of stocks, bonds and derivatives. Warren has floated an FTT to help pay for her "Medicare for All" plan, while Sanders is considering one to pay for his tuition-free college and student debt cancellation package.

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Supporters of taxes on financial trades argue that these taxes would target wealthy investors and would help to reduce inequality and inefficiencies in the financial markets.

But during Thursday's hearing, Republican lawmakers brought up the Democratic proposals for FTTs, calling them problematic.

"The reality is that average everyday investors, especially mutual fund investors and those that are saving for retirement, will be severely impacted by this nefarious tax," said Rep. Patrick McHenryPatrick Timothy McHenryLawmakers highlight need for financial literacy to improve credit The Hill's Morning Report - Biden argues for legislative patience, urgent action amid crisis Financial firms brace for Biden's consumer agency chief MORE (N.C.), the top Republican on the Financial Services Committee.

Rep. Ann WagnerAnn Louise WagnerCapitol Police tribute turns political Trump era bows out with scorched-earth drama in divided GOP Democrats projected to retain House majority MORE (R-Mo.) also expressed concerns that an FTT would hurt ordinary Americans. She argued that "a financial transactions tax has already been tried internationally, and the results have been very poor."

Mnuchin said that Treasury has "committed to do some work internally and on an interagency basis to study this to see if we can try to come up with some research on what the impact would be."

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Mnuchin said he thinks that an FTT could lead to financial activity moving from the U.S. to places such as London and Hong Kong. He also said it would be a "burden on economic growth, and more importantly, it would be a burden on all the American taxpayers who already pay taxes and hold mutual funds and have their savings and their retirement in mutual funds."

Additionally, Mnuchin said that the United States' borrowing costs would increase if an FTT were imposed on government securities.

Rep. Brad ShermanBradley (Brad) James ShermanTributes pour in for Kobe Bryant on one-year anniversary of death Bottom line 150 House Democrats support Biden push to reenter Iran nuclear deal MORE (D-Calif.) said that there are pros and cons with FTTs but that the concerns Wagner has "would be avoided with a wealth tax." He offered to put Wagner in touch with the economists who are helping Warren with her wealth tax proposal.

Wagner replied, "I can't wait for that debate."