Mnuchin expresses concerns about proposed taxes on financial trades

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

Treasury Secretary Steven MnuchinSteven Terner MnuchinTrump eyes additional funds for small businesses impacted by pandemic Decentralized leadership raises questions about Trump coronavirus response Progressive group knocks McConnell for talking judicial picks during coronavirus 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 SandersSome Sanders top allies have urged him to withdraw from 2020 race: report We're at war and need wartime institutions to keep our economy producing what's necessary Larry David: Bernie Sanders should drop out of 2020 race MORE (I-Vt.) and Elizabeth WarrenElizabeth WarrenDemocrats seize on Trump's firing of intelligence community watchdog Biden says his administration could help grow 'bench' for Democrats Overnight Health Care: CDC recommends face coverings in public | Resistance to social distancing sparks new worries | Controversy over change of national stockpile definition | McConnell signals fourth coronavirus bill 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 McHenryBottom line Top GOP post on Oversight draws stiff competition Lawmakers shame ex-Wells Fargo directors for failing to reboot bank MORE (N.C.), the top Republican on the Financial Services Committee.

Rep. Ann WagnerAnn Louise WagnerMembers of House GOP leadership self-quarantining after first lawmakers test positive Wells Fargo chief pledges fresh start for scandal-ridden bank Here are the lawmakers who have self-quarantined as a precaution 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 ShermanPelosi scrambles to secure quick passage of coronavirus aid House Democrats eyeing much broader Phase 3 stimulus Overnight Defense: Lawmakers clash during Pompeo hearing on Iran | Trump touts Taliban deal ahead of signing | Trump sued over plan to use Pentagon funds for border wall 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."