Inclusive Prosperity Act of 2019

I 116TH CONGRESS 1ST SESSION H. R. 2923 To impose a tax on certain trading transactions to invest in our families and communities, improve our infrastructure and our environment, strengthen our financial security, expand opportunity and reduce market volatility. IN THE HOUSE OF REPRESENTATIVES MAY 22, 2019 Ms. LEE of California (for herself, Ms. NORTON, Mr. TAKANO, Mr. KHANNA, Mr. COHEN, Ms. JAYAPAL, Ms. DELAURO, Ms. OMAR, Mr. MCGOVERN, Mr. HUFFMAN, Mr. POCAN, Ms. SCHAKOWSKY, Mr. GRIJALVA, Ms. PIN- GREE, Mr. LOWENTHAL, Ms. GABBARD, Mr. ESPAILLAT, Ms. TLAIB, Mr. GARAMENDI, and Mr. HASTINGS) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To impose a tax on certain trading transactions to invest in our families and communities, improve our infrastruc- ture and our environment, strengthen our financial secu- rity, expand opportunity and reduce market volatility. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Inclusive Prosperity 4 Act of 2019’’. 5 VerDate Sep 11 2014 02:12 Jun 07, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H2923.IH H2923 kjohnson on DSK79L0C42 with BILLS 2 •HR 2923 IH SEC. 2. FINDINGS. 1 Congress finds the following: 2 (1) The global financial crisis cost Americans 3 $19 trillion in lost wealth. 4 (2) The global financial crisis was caused by fi- 5 nancial firms taking great financial risks without 6 disclosing those risks to their investors or their regu- 7 lators, and by regulatory failures to adequately po- 8 lice the financial services markets for crime, unfair 9 or deceptive practices, fraud, lack of transparency, 10 and mismanagement. 11 (3) Deceptive, illegal, and speculative financial 12 practices have harmed public confidence in the integ- 13 rity and fairness of many United States financial in- 14 stitutions, and threaten the basic strengths of the 15 United States economic system. 16 (4) American citizens provided the money to 17 stabilize the financial sector, making $700 billion 18 available to 800 financial institutions, automakers, 19 and insurance companies. 20 (5) The global financial crisis, along with the 21 wars, unabated and unaddressed climate change, 22 unsustainable tax cuts, and a continuing unemploy- 23 ment crisis, if unaddressed, will deprive a generation 24 of a meaningful role in the larger economy. 25 VerDate Sep 11 2014 02:12 Jun 07, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2923.IH H2923 kjohnson on DSK79L0C42 with BILLS 3 •HR 2923 IH (6) Nurses, teachers, public safety officers, and 1 other public sector workers have faced drastic fund- 2 ing cuts, harming our long-term public safety and 3 prospects for economic growth. 4 (7) Extreme weather events rooted in climate 5 change, including flood, drought, fire, super storms 6 like Sandy, as well as ‘‘slow-onset’’ events like sea 7 level rise, are wreaking havoc in the United States 8 and across the globe resulting in climate change im- 9 pacts that jeopardize the lives and livelihoods of 10 Americans, causing large-scale food and energy inse- 11 curity in developing countries, and extolling untold 12 economic costs. 13 (8) According to economists, a small tax on 14 transfer of ownership of every financial trade could 15 generate hundreds of billions annually in revenue, 16 which when invested could help create millions of 17 good-paying jobs in both the public and private sec- 18 tors every year, as well as provide urgently needed 19 funding for programs to combat climate change and 20 address global health and development issues. 21 (9) A transactions tax will help limit high-fre- 22 quency trading which may be as high as 70 percent 23 of the market and results in declining market sta- 24 bility through extreme price volatility, distorted mar- 25 VerDate Sep 11 2014 02:12 Jun 07, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2923.IH H2923 kjohnson on DSK79L0C42 with BILLS 4 •HR 2923 IH ket prices, and structural vulnerability to speculation 1 far in excess of the liquidity needs of commercial 2 hedgers. 3 (10) A securities transfer tax would have a neg- 4 ligible impact on the average investor. 5 (11) The United States had a transfer tax from 6 1914 to 1966: The Revenue Act of 1914 (Act of 7 Oct. 22, 1914 (ch. 331, 38 Stat. 745)) levied a 0.02 8 percent tax on all sales or transfers of stock which 9 was doubled in 1932 to help overcome the budgetary 10 challenges during the Great Depression. 11 (12) Forty nations have or have had some form 12 of a financial transactions tax; it is endorsed by 13 more than 1,000 economists; and 10 European 14 countries are moving forward on implementing a co- 15 ordinated financial transactions tax after European 16 Union finance ministers signaled approval in Janu- 17 ary 2013. 18 (13) Revenue generated by this tax could be 19 available to— 20 (A) create a more dynamic economy and 21 enhance economic opportunity by providing free 22 college education and lessening student debt; 23 (B) strengthen financial security and ex- 24 pand opportunity for low- and moderate-income 25 VerDate Sep 11 2014 02:12 Jun 07, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2923.IH H2923 kjohnson on DSK79L0C42 with BILLS 5 •HR 2923 IH families, including strengthening the social safe- 1 ty net and expanding resources for child care, 2 Social Security, and savings incentives; 3 (C) expand resources for State and Fed- 4 eral investments that protect our health and en- 5 vironment, investing in water and wastewater 6 infrastructure, rebuild our crumbling physical 7 infrastructure, and create good paying jobs 8 by— 9 (i) expanding and improving Medicare 10 and Medicaid; 11 (ii) investing in job training, public 12 sector jobs, and green jobs; 13 (iii) providing housing assistance to 14 low-income households; 15 (iv) investing in transportation includ- 16 ing public mass transit and an infrastruc- 17 ture bank that promotes environmentally 18 responsible domestic manufacturing and 19 construction industries; and 20 (v) protecting our environment and 21 building a clean energy economy, including 22 efforts to combat climate change and build 23 resilience to its effects in the United States 24 and in developing countries; and 25 VerDate Sep 11 2014 02:12 Jun 07, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2923.IH H2923 kjohnson on DSK79L0C42 with BILLS 6 •HR 2923 IH (D) fund international sustainable pros- 1 perity programs such as HIV treatment, re- 2 search and prevention programs, other inter- 3 national health and humanitarian assistance, 4 and climate change adaptation and mitigation 5 efforts by developing countries. 6 SEC. 3. TRANSACTION TAX. 7 (a) IN GENERAL.—Chapter 36 of the Internal Rev- 8 enue Code of 1986 is amended by inserting after sub- 9 chapter B the following new subchapter: 10 ‘‘Subchapter C—Tax on Trading Transactions 11 ‘‘Sec. 4475. Tax on trading transactions. ‘‘SEC. 4475. TAX ON TRADING TRANSACTIONS. 12 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 13 a tax on the transfer of ownership in each covered trans- 14 action with respect to any security. 15 ‘‘(b) RATE OF TAX.—The tax imposed under sub- 16 section (a) with respect to any covered transaction shall 17 be the applicable percentage of the specified base amount 18 with respect to such covered transaction. The applicable 19 percentage shall be— 20 ‘‘(1) 0.5 percent in the case of a security de- 21 scribed in subparagraph (A) or (B) of subsection 22 (e)(1), 23 VerDate Sep 11 2014 02:12 Jun 07, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2923.IH H2923 kjohnson on DSK79L0C42 with BILLS 7 •HR 2923 IH ‘‘(2) 0.10 percent in the case of a security de- 1 scribed in subparagraph (C) of subsection (e)(1), 2 and 3 ‘‘(3) 0.005 percent in the case of a security de- 4 scribed in subparagraph (D), (E), or (F) of sub- 5 section (e)(1). 6 ‘‘(c) SPECIFIED BASE AMOUNT.—For purposes of 7 this section, the term ‘specified base amount’ means— 8 ‘‘(1) except as provided in paragraph (2), the 9 fair market value of the security (determined as of 10 the time of the covered transaction), and 11 ‘‘(2) in the case of any payment described in 12 subsection (h), the amount of such payment. 13 ‘‘(d) COVERED TRANSACTION.—For purposes of this 14 section, the term ‘covered transaction’ means— 15 ‘‘(1) except as provided in paragraph (2), any 16 purchase if— 17 ‘‘(A) such purchase occurs or is cleared on 18 a facility located in the United States, or 19 ‘‘(B) the purchaser or seller is a United 20 States person, and 21 ‘‘(2) any transaction with respect to a security 22 described in subparagraph (D), (E), or (F) of sub- 23 section (e)(1), if— 24 VerDate Sep 11 2014 02:12 Jun 07, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H2923.IH H2923 kjohnson on DSK79L0C42 with BILLS 8 •HR 2923 IH ‘‘(A) such security is traded or cleared on 1 a facility located in the United States, or 2 ‘‘(B) any party with rights under such se- 3 curity is a United States person. 4 ‘‘(e) SECURITY AND OTHER DEFINITIONS.—For pur- 5 poses of this section— 6 ‘‘(1) IN GENERAL.—The term ‘security’ 7 means— 8 ‘‘(A) any share of stock in a corporation, 9 ‘‘(B) any partnership or beneficial owner- 10 ship interest in a partnership or trust, 11 ‘‘(C) any note, bond, debenture, or other 12 evidence of indebtedness, other than a State or 13 local bond the interest of which is excluded 14 from gross income under section 103(a), 15 ‘‘(D) any evidence of an interest in, or a 16 derivative financial instrument with respect to, 17 any security or securities described in subpara- 18 graph (A), (B), or (C), 19 ‘‘(E) any derivative financial instrument 20 with respect to any currency or commodity in- 21 cluding notional principal contracts, and 22 ‘‘(F) any other derivative financial instru- 23 ment any payment with respect to which is cal- 24 culated by reference to any specified index. 25 VerDate Sep 11 2014 02:12 Jun 07, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H2923.IH H2923 kjohnson on DSK79L0C42 with BILLS 9 •HR 2923 IH ‘‘(2) DERIVATIVE FINANCIAL INSTRUMENT.— 1 The term ‘derivative financial instrument’ includes 2 any option, forward contract, futures contract, no- 3 tional principal contract, or any similar financial in- 4 strument. 5 ‘‘(3) SPECIFIED INDEX.—The term ‘specified 6 index’ means any one or more of any combination 7 of— 8 ‘‘(A) a fixed rate, price, or amount, or 9 ‘‘(B) a variable rate, price, or amount, 10 which is based on any current objectively deter- 11 minable information which is not within the 12 control of any of the parties to the contract or 13 instrument and is not unique to any of the par- 14 ties’ circumstances. 15 ‘‘(4) TREATMENT OF EXCHANGES.— 16 ‘‘(A) IN GENERAL.—An exchange shall be 17 treated as the sale of the property transferred 18 and a purchase of the property received by each 19 party to the exchange. 20 ‘‘(B) CERTAIN DEEMED EXCHANGES.—In 21 the case of a distribution treated as an ex- 22 change for stock under section 302 or 331, the 23 corporation making such distribution shall be 24 VerDate Sep 11 2014 02:12 Jun 07, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H2923.IH H2923 kjohnson on DSK79L0C42 with BILLS 10 •HR 2923 IH treated as having purchased such stock for pur- 1 poses of this section. 2 ‘‘(f) EXCEPTIONS.— 3 ‘‘(1) EXCEPTION FOR INITIAL ISSUES.—No tax 4 shall be imposed under subsection (a) on any cov- 5 ered transaction with respect to the initial issuance 6 of any security described in subparagraph (A), (B), 7 or (C) of subsection (e)(1). 8 ‘‘(2) EXCEPTION FOR CERTAIN TRADED SHORT- 9 TERM INDEBTEDNESS.—A note, bond, debenture, or 10 other evidence of indebtedness which— 11 ‘‘(A) is traded on a trading facility located 12 in the United States, and 13 ‘‘(B) has a fixed maturity of not more 14 than 60 days, 15 shall not be treated as described in subsection 16 (e)(1)(C). 17 ‘‘(3) EXCEPTION FOR SECURITIES LENDING AR- 18 RANGEMENTS.—No tax shall be imposed under sub- 19 section (a) on any covered transaction with respect 20 to which gain or loss is not recognized by reason of 21 section 1058. 22 ‘‘(g) BY WHOM PAID.— 23 ‘‘(1) IN GENERAL.—The tax imposed by this 24 section shall be paid by— 25 VerDate Sep 11 2014 02:12 Jun 07, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H2923.IH H2923 kjohnson on DSK79L0C42 with BILLS 11 •HR 2923 IH ‘‘(A) in the case of a transaction which oc- 1 curs or is cleared on a facility located in the 2 United States, such facility, and 3 ‘‘(B) in the case of a purchase not de- 4 scribed in subparagraph (A) which is executed 5 by a broker (as defined in section 6045(c)(1)), 6 the broker. 7 ‘‘(2) SPECIAL RULES FOR DIRECT, ETC., 8 TRANSACTIONS.—In the case of any transaction to 9 which paragraph (1) does not apply, the tax imposed 10 by this section shall be paid by— 11 ‘‘(A) in the case of a transaction described 12 in subsection (d)(1)— 13 ‘‘(i) the purchaser if the purchaser is 14 a United States person, and 15 ‘‘(ii) the seller if the purchaser is not 16 a United States person, and 17 ‘‘(B) in the case of a transaction described 18 in subsection (d)(2)— 19 ‘‘(i) the payor if the payor is a United 20 States person, and 21 ‘‘(ii) the payee if the payor is not a 22 United States person. 23 ‘‘(h) CERTAIN PAYMENTS TREATED AS SEPARATE 24 TRANSACTIONS.—Except as otherwise provided by the 25 VerDate Sep 11 2014 02:12 Jun 07, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H2923.IH H2923 kjohnson on DSK79L0C42 with BILLS 12 •HR 2923 IH Secretary, any payment with respect to a security de- 1 scribed in subparagraph (D), (E), or (F) of subsection 2 (e)(1) shall be treated as a separate transaction for pur- 3 poses of this section, including— 4 ‘‘(1) any net initial payment, net final or termi- 5 nating payment, or net periodical payment with re- 6 spect to a notional principal contract (or similar fi- 7 nancial instrument), 8 ‘‘(2) any payment with respect to any forward 9 contract (or similar financial instrument), and 10 ‘‘(3) any premium paid with respect to any op- 11 tion (or similar financial instrument). 12 ‘‘(i) ADMINISTRATION.—The Secretary shall carry 13 out this section in consultation with the Securities and Ex- 14 change Commission and the Commodity Futures Trading 15 Commission. 16 ‘‘(j) GUIDANCE; REGULATIONS.—The Secretary 17 shall— 18 ‘‘(1) provide guidance regarding such informa- 19 tion reporting concerning covered transactions as the 20 Secretary deems appropriate, including reporting by 21 the payor of the [Text truncated for display. 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