Wall Street Tax Act of 2025
- Bill Number
- H.R. 4035
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-06-17: Referred to the House Committee on Ways and Means.
- Last Updated
- 2026-03-25T08:05:33Z
AI-Generated Summary
Purpose of the Legislation
The Wall Street Tax Act of 2025 aims to generate revenue by imposing a new tax on certain financial trading activities, specifically targeting purchases and sales of securities (like stocks and bonds) and transactions involving derivatives (financial contracts whose value depends on underlying assets, such as options or swaps). This is intended to create a progressive funding mechanism by taxing high-volume Wall Street trading.
Key Provisions
- Imposition of Tax: A tax applies to "covered transactions," which include:
- Purchases of securities on U.S.-based exchanges or involving U.S. persons (individuals or entities located in or tied to the U.S.).
- Transactions with derivatives traded on U.S. exchanges or involving U.S. persons with rights under the derivative.
- Tax Rate Structure: The rate starts low and increases over time:
- 0.02% of the transaction value from 2026 to 2026.
- 0.04% from 2027 to 2027.
- 0.06% from 2028 to 2028.
- 0.08% from 2029 to 2029.
- 0.1% starting in 2030.
- Tax Base: The tax is calculated on the fair market value of the security at the time of the transaction, or the payment amount for derivatives.
- Exceptions:
- No tax on initial issuances of securities (e.g., new stock offerings).
- Short-term debt instruments (maturing in 100 days or less) traded on U.S. exchanges are excluded.
- Certain derivatives are exempt, such as those requiring physical delivery of real property (unless cash settlement is easily available), insurance contracts, employee stock options, and commodities used in a business's normal operations.
- Payment Responsibility:
- U.S. exchanges or brokers pay for transactions on their platforms.
- For other cases, the buyer, seller, payer, or payee pays, depending on U.S. involvement; U.S. shareholders of controlled foreign corporations (foreign companies majority-owned by U.S. persons) share the liability proportionally.
- Special Rules:
- Exchanges (swaps of assets) are treated as separate sales and purchases.
- Payments on derivatives are treated as individual transactions.
- Controlled foreign corporations are treated as U.S. persons for tax purposes.
- Definitions:
- "Security" includes stocks, partnership interests, bonds, and derivatives.
- "Derivative" broadly covers contracts tied to stocks, debt, commodities, currencies, rates, or indices, but excludes certain embedded components in debt or financing arrangements.
- Administration: The IRS (Internal Revenue Service) will enforce the tax, consulting with the SEC (Securities and Exchange Commission) and CFTC (Commodity Futures Trading Commission). New reporting requirements apply to controlled foreign corporations.
- Effective Date: Applies to transactions after December 31, 2025.
Significant Changes to Existing Law
- Adds a new Subchapter C to Chapter 36 of the Internal Revenue Code of 1986, introducing a transaction-based tax on securities and derivatives that did not previously exist in this form.
- Expands information reporting under Section 6038 to include details on covered transactions by controlled foreign corporations.
- No prior U.S. federal tax specifically targeted trading volume in this graduated manner; this creates a novel excise tax (a tax on specific activities rather than income) on financial markets.
Potential Impacts
- Government Agencies: The IRS gains new enforcement duties, potentially increasing administrative costs but providing a steady revenue stream (estimated in billions annually, depending on trading volumes). Collaboration with SEC and CFTC could enhance oversight of financial markets.
- Citizens and Investors: Individual and institutional traders may face higher costs for frequent trades, possibly discouraging short-term speculation and encouraging long-term investing. Retail investors (everyday people trading stocks) could see minor fee increases via brokers, while high-frequency traders bear the brunt.
- Financial Markets: Could reduce trading volume and liquidity (ease of buying/selling) on U.S. exchanges, potentially shifting some activity overseas, but might stabilize markets by curbing excessive speculation.
- International Relations: Taxes U.S.-linked transactions globally, which may prompt foreign retaliation or negotiations on cross-border trading rules; could affect U.S. competitiveness in global finance without directly impacting foreign entities unless they involve U.S. persons.
Main Stakeholders Affected
- Financial Institutions and Traders: Brokers, exchanges (e.g., NYSE), hedge funds, and high-frequency trading firms will pay or collect the tax, facing compliance burdens and possible reduced profits.
- Investors: U.S. individuals, corporations, and shareholders of foreign companies involved in trading securities or derivatives.
- Government Entities: IRS for collection and enforcement; SEC and CFTC for regulatory input.
- Businesses: Companies issuing securities or using derivatives for hedging (risk management) in normal operations may see indirect costs passed to consumers.
- Foreign Entities: Controlled foreign corporations and their U.S. owners, as they are treated like U.S. taxpayers.
Notable Legal, Constitutional, or Political Implications
- Legal: Relies on Congress's broad taxing power under the Internal Revenue Code; introduces anti-avoidance regulations to close loopholes, such as using non-U.S. entities. May lead to litigation over derivative definitions or fair market value calculations.
- Constitutional: Aligns with Article I's authorization for taxes on activities affecting commerce; unlikely to raise equal protection issues as it targets transactions rather than individuals directly.
- Political: Positions as a "Wall Street tax" to fund public priorities (though not specified in the bill), appealing to progressive goals of reducing inequality by taxing wealthy financial sectors. Could spark debate on market interference versus revenue needs, influencing future tax policy on automation-driven trading.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (9)
Rep. Smith, Adam [D-WA-9], Rep. Jayapal, Pramila [D-WA-7], Rep. McGovern, James P. [D-MA-2], Rep. Pingree, Chellie [D-ME-1], Rep. Schakowsky, Janice D. [D-IL-9], Rep. Tlaib, Rashida [D-MI-12], Rep. Watson Coleman, Bonnie [D-NJ-12], Rep. Frost, Maxwell [D-FL-10], Del. Norton, Eleanor Holmes [D-DC-At Large]
Recent Actions
- 2025-06-17: Referred to the House Committee on Ways and Means.
- 2025-06-17: Introduced in House
- 2025-06-17: Introduced in House
Bill Versions
- Wall Street Tax Act of 2025 — issued 2025-06-17 — PDF (14 pages)