One of the advice industry's top challenges is to fend off state attempts to tax financial transactions even as more lawmakers in Washington are warming to the idea.
Chet Helck, CEO of the Global Private Client Group at
Raymond James Financial, told advisers attending the RJ national adviser conference in Dallas today that while industry opposition seems to have squelched efforts by lawmakers in Ohio and Minnesota who recently proposed bills that would tax financial transactions, other states need to be watched vigilantly for similar action.
Financial transaction levies not only would be an added burden to clients who would have to pay the tax, they also would be an administrative nightmare for firms because the laws are not being consistently written — some are based on when a security is bought, others when it is sold, as well as other differences, Mr. Helck said.
“Concerns about regulations will continue for quite some time, and what comes out will impact how you do business for the rest of your lives,” Mr. Helck said.
In Washington, the Senate began debate today on a bill that would allow states to require Internet retailers to collect and remit sales taxes, which some critics view as opening a backdoor to a financial transaction tax.
Financial groups contend that the legislation would create an opening for states to impose financial transaction taxes. They are calling for hearings on the measure, which went straight to the Senate floor after a procedural vote yesterday. A final vote could come this week.
“We continue to oppose any kind of financial transaction tax, as they are essentially a sales tax on investors,” Securities Industry and Financial Markets Association acting chief executive Kenneth E. Bentsen Jr. said in a statement. “Such levies are simply passed on to ordinary retail investors and retirees, reducing the incentive to save and distorting capital markets.”
Worries about a state-level financial transaction tax might refocus attention on similar federal legislation.
A measure introduced by Sen. Tom Harkin, D-Iowa, and Rep. Peter DeFazio, D-Ore., would place a tax of 3 cents for every $100 in value on trading by banking and financial firms in stocks, bonds and other securities — except for their initial issuance. A bill introduced by Rep. Keith Ellison, D-Minn., would place a 50-cent tax on every $100 of trades.
The bill authors contend that the tax would provide much-needed new federal revenue without harming ordinary investors. Opponents counter that a transactions tax would raise costs for investors and limit returns.
The White House opposes a financial transactions tax but supports the Internet sales tax legislation.
Another regulatory issue for advisers to keep on their radar is government rules on independent contractors, a status that allows firms to incur fewer taxes. Fear that this status could be taken away has been an issue for the advisory industry for about 20 years, according to Mr. Helck.
Industry groups recently have spoken to members of Congress to promote a carve-out for financial services in case the status of independent contractors comes up again in new rounds of tax reform, he said.
