S.2127 - Wall Street Tax Act of 2025 (119th Congress)
Summary
The Wall Street Tax Act of 2025 proposes to amend the Internal Revenue Code of 1986 by imposing a tax on certain trading transactions. This tax would apply to covered transactions involving securities, including stocks, bonds, and derivatives, with increasing rates from 0.02% to 0.1% between 2026 and 2030. The tax is intended to be paid by qualified boards or exchanges, brokers, or, in some cases, the purchaser or seller involved in the transaction.
Expected Effects
The implementation of this act would likely increase the cost of trading, potentially reducing trading volume and market liquidity. It could also generate revenue for the government, which could be used to fund other programs. The tax may also incentivize longer-term investment strategies.
Potential Benefits
- Potential increase in government revenue that could be used to fund public services or reduce the national debt.
- Discouragement of excessive speculation and high-frequency trading, potentially leading to more stable markets.
- Simplification of the tax code by consolidating taxes on financial transactions.
- Could incentivize longer-term investment strategies.
- May reduce the incentive for short-term speculative trading.
Most Benefited Areas:
Potential Disadvantages
- Increased costs for investors, particularly retail investors and those with high trading frequency.
- Potential reduction in market liquidity due to decreased trading activity.
- Possible relocation of trading activity to exchanges outside the United States to avoid the tax.
- Complexity in implementation and compliance, particularly regarding the definition of 'covered transactions' and the treatment of derivatives.
- Could negatively impact pension funds and retirement accounts if trading costs increase significantly.
Most Disadvantaged Areas:
Constitutional Alignment
The power of Congress to levy taxes is explicitly granted in Article I, Section 8, Clause 1 of the Constitution, which states that Congress has the power to lay and collect taxes, duties, imposts, and excises. The Wall Street Tax Act falls under this enumerated power as it imposes a tax on financial transactions.
However, the constitutionality could be challenged if the tax is deemed to disproportionately burden interstate commerce, violating the Commerce Clause (Article I, Section 8, Clause 3). The tax must be applied uniformly and not discriminate against specific states or regions.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).