Wall Street Tax Act of 2025
The Wall Street Tax Act of 2025 would create a new Subchapter C in the Internal Revenue Code that imposes a small transaction tax on trading of many financial securities and derivatives. The tax would apply to covered transactions involving securities traded on U.S. exchanges or by U.S. persons, and to derivatives with rights held by U.S. persons or traded on U.S. exchanges. Rates start very low (0.02% in the first window) and gradually rise to 0.10% after 2029. The tax base is the fair market value of the security at the time of the transaction (or the payment amount for derivatives). There are exemptions (notably for initial issuances) and detailed rules about who is responsible for paying the tax, how exchanges and brokers collect it, and how cross-border and controlled foreign corporations are treated. The Secretary would administer the tax in consultation with the SEC and CFTC, with reporting and anti-avoidance regulations to prevent evasion. The measure would take effect for transactions occurring after December 31, 2025. In short, the bill would add a broad, time-phased “financial transaction tax” on most stock, bond, and derivative trades conducted in or by U.S. persons, with the goal of raising revenue while shaping trading costs and market activity.
Key Points
- 1New tax structure and rates
- 2- Establishes a new Tax on Trading Transactions (Subchapter C) with stepped rates: 0.02% (2025–2026), 0.04% (2026–2027), 0.06% (2027–2028), 0.08% (2028–2029), and 0.10% (from 2030 onward).
- 3- Tax applies to “covered transactions” tied to securities, notional payments on derivatives, and other specified financial instruments.
- 4What counts as a covered transaction
- 5- Purchases of securities on U.S. qualified boards/exchanges or by U.S. persons.
- 6- Derivative transactions that are traded on U.S. exchanges or involve U.S. persons.
- 7- Initial issuances of securities are exempt from the tax.
- 8How the tax is calculated and paid
- 9- Tax base is the fair market value of the security at the time of the transaction (or the derivative payment amount).
- 10- Excludes certain short-term debt items (maturity ≤ 100 days) from being treated as covered securities.
- 11- Payment responsibility varies: exchanges/brokers collect for trades on U.S. venues; for other cases, the payer or the buyer/seller (or the US/foreign status) determines who pays.
- 12Derivatives and embedded components
- 13- Defines derivatives broadly (options, futures, swaps, etc.) and specifies when a contract with embedded derivatives counts as a derivative.
- 14- Provides rules for how derivative transactions are treated for tax purposes and how exchanges treat derivatives as sales/purchases.
- 15Cross-border and corporate considerations
- 16- Controlled Foreign Corporations (CFCs) are treated as U.S. persons for purposes of the tax.
- 17- US shareholders of a CFC may owe tax pro rata based on their ownership rather than the CFC paying directly in certain cases.
- 18- Administration involves coordination with the SEC and CFTC, plus information reporting specific to CFCs.
- 19Administration, reporting, and compliance
- 20- The Secretary of the Treasury, in consultation with the SEC and CFTC, would administer the tax.
- 21- Guidance and regulations would address information reporting and anti-avoidance to prevent evasion, including use of non-U.S. persons.
- 22Effective date
- 23- Applies to transactions occurring after December 31, 2025.