As Illinois lawmakers consider new measures in Springfield, a controversial tax on stock market trades has been put back in line to be considered.
Supporters of the Financial Transactions Tax Act, dubbed the “LaSalle Street Tax” after the bustling Chicago street at the center of the business district, have hailed it as the solution to the state's fiscal problems. But, even some of the state’s most progressive politicians have balked at the premise. Some said they worried the reaction would be an exodus of financial activity.
House Bill 23 was recently reassigned to the House Revenue and Finance Committee. By levying a $1 tax on any financial transaction completed in the state, supporters have said it would bring in estimated $6 billion annually, not accounting for any behavioral backlash.
The Chicago Board of Trade, Chicago Mercantile Exchange, and the Chicago Board Options Exchange would all be targeted by the new tax.
When the bill was discussed, but not voted on in March of 2019, former trader Matt Harrington said it was crafted in a way that wouldn’t be limited to companies in Illinois that trade in a Chicago-based market.
“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, which could hear the bill as soon as Thursday, but isn’t required to call it for consideration.
The bill, like other proposals before it, would not apply the $1 per trade tax to securities held in a retirement account or transactions involving a mutual fund.
Gov. J.B. Pritzker shot down the idea while on the campaign trail. He said the markets would react to the new tax. Chicago Mercantile Exchange CEO Terry Duffy told Bloomberg shortly after the March hearing that he had made it clear to Illinois lawmakers that moving out of the state would not be difficult because the bulk of its trades were done electronically.
"It would have been difficult for me to go to the state legislature and say, 'You know what, I'm gonna move and I gotta take 6,000 traders with me and disrupt their families.' That's not the case anymore," he said, 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."
Illinois lawmakers have enacted a number of tax and fee hikes in recent years, including a permanent income tax increase to 4.95 percent in 2017. Lawmakers doubled the state's motor fuel tax to 38 cents per gallon as part of the Rebuild Illinois infrastructure plan. The state has a backlog of bills estimated at $7.3 billion as of Monday.
A number of other countries have a form of financial transaction tax. U.S. Senator Bernie Sanders, a Vermont independent running for president, is the sponsor of a bill that would levy a 1 cent financial transaction tax at the federal level.