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Illinois lawmakers make case for financial transactions tax

Illinois Watchdog.Org

Friday, March 15, 2019  |  Article  |  By Cole Lauterbach

Financial Institutions (7) , Governor (44) , Taxes, misc. (89) Flowers, Mary--State House, 31
Supporters are making a case for instituting a new tax on financial transactions in the state of Illinois.

The legislation would require a $1 fee on any financial transaction done in the state with the exception of securities held in a retirement account or a transaction involving a mutual fund.

“Beginning January 1, 2020, a tax is imposed on the privilege of engaging in a financial transaction on any of the following exchanges or boards of trade: the Chicago Stock Exchange; the Chicago Mercantile Exchange; the Chicago Board of Trade; or the Chicago Board Options Exchange,” according to the text of the bill. “The tax is imposed at a rate of $1 for each transaction for which the underlying asset is an agricultural product, a financial instruments contract, or an options contract. The tax shall be paid by the trading facility or, in any other case, by the purchaser involved in the transaction.”

Illinois state Rep. Mary Flowers, D-Chicago, has been the standard bearer for a state-based financial transactions tax for a number of years. She brought Matt Harrington, a self-described financial expert, to explain how the financial transactions tax “could help bring prosperity to our economy.”

He said the bill would raise billions of dollars a year for the state by reaching not only reach transactions done in Illinois, but also those done by elsewhere by companies that have a footprint in the state.

“We’ve re-written the bill to make sure that even if they have a footprint here and they clear their trades in New Jersey, they will be responsible,” he said to the House Revenue and Finance Committee.

Because of a posting notice mistake, the committee didn't vote on the bill Thursday. soon.

In the past, the legislation has been discussed but hasn't gone far. This iteration of the tax is also sponsored by Majority Leader Greg Harris, D-Chicago.

When asked about a “LaSalle Street tax” on the campaign trail, Gov. J.B. Pritzker deferred. He said that businesses would pay their fair share in the form of a progressive tax.

Representatives of the finance industry have warned that such a tax would cause entire markets to leave the state, which they said would be as simple as moving data to servers elsewhere because most trading is done digitally.

"It would have been difficult for me to go to the state legislature and say, 'You know what, I'm going to move and I gotta take 6,000 traders with me and disrupt their families.' That's not the case anymore," Chicago Mercantile Exchange president Terry Duffy said last year, referring to CME's transition to online trading. "We sold our data center. We sold everything we have in agreement with that data center. They own 22 other data centers in the United States. They could move us into any one of them."

Critics of a financial transactions tax say it creates a “tax pyramid” that taxes the same good or service multiple times.

Similar federal legislation has been introduced that would add a 1-cent tax per transaction.