[Congressional Record Volume 144, Number 135 (Thursday, October 1, 1998)]
[Extensions of Remarks]
[Pages E1874-E1875]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              REDUCE THE HIDDEN TAX ON AMERICAN INVESTORS

                                 ______
                                 

                        HON. GERALD B.H. SOLOMON

                              of new york

                    in the house of representatives

                       Thursday, October 1, 1998

  Mr. SOLOMON. Mr. Speaker, on July 14, 1998, along with the 
distinguished Chief Deputy Democratic Whip, the Gentleman from New 
Jersey, I introduced H.R. 4213, the Savings and Investment Relief Act 
of 1998. This legislation would cap the amount of stock transaction 
fees which could be collected by the Securities and Exchange Commission 
(SEC). Collections for the various SEC ``user fees''--which were 
designed solely to fund the Commission--had grown over time to 
significantly exceed the SEC's budget. In 1996, we passed legislation 
to bring fee collections more in line with the SEC's budget. However, 
actual collections have continued to skyrocket. This year alone, the 
SEC will bring in $1.2 billion in fees--four times its budget.
  These fees have become a large and unintended tax on all Americans 
who invest in the stock market. The distinguished gentleman from Texas, 
the Chairman of the Ways & Means Committee, has written to me to 
express the Committee's view that the excess fees amount to taxes. At 
this time Mr. Speaker, I would ask to have this letter made a part of 
the Record.
  Mr. Speaker, this tax is paid by all Americans who own and sell 
stocks. This includes individuals and families investing for their 
future--for needs such as retirement and children's education. The tax 
affects mutual fund investors, pension plans, and other retirement 
vehicles, such as IRAs and 401(k) plans. It is time to stop this hidden 
tax on hard working investors.
  Mr. Speaker, H.R. 4213 has received a groundswell of support. In 
addition to the distinguished Chief Deputy Democratic Whip, the bill 
now has close to 60 cosponsors from both sides of the aisle, including 
virtually the entire Republican leadership, and the distinguished 
gentleman from Louisiana, the Chairman of the House Appropriations 
Committee. Cosponsors include a number of Members from the 
Appropriations, Commerce and Ways & Means Committees. I would like to 
enter a list of the bill's cosponsors into into the Record. It has been 
endorsed by a number of outside groups, including Americans for Tax 
Reform, the U.S. Chamber of Commerce, the National Federation of 
Independent Businesses, the National Taxpayers Union, Citizens for a 
Sound Economy, the Profit Sharing/401(k) Council of America, and dozens 
of state-level taxpayer advocacy groups.
  Perhaps most importantly, we have revised this legislation so that it 
has no impact on the collection and spending levels in the pending FY99 
Commerce, Justice, State Appropriations bill and to avoid pay-go 
scoring problems. I am pleased to announce that the Congressional 
Budget Office (CBO) has scored this revised language as revenue 
neutral. At this time, Mr. Speaker, I would like to enter into the 
Record  a copy of the revised legislation and the CBO letter scoring 
the legislation.
  Mr. Speaker, it is imperative to act on this legislation this year. 
Due to the budget scoring rules, it will be virtually impossible to 
move a revenue neutral solution next year, once the CBO revises its 
baseline upward to reflect the reality of the fee surplus. This hidden 
tax is having a real impact on hardworking families saving for their 
retirement. We often talk in Congress about providing tax relief to 
families. Let's start by giving back some of the unintended hidden tax 
on investments. Mr. Speaker, I urge the House to act of this 
legislation expeditiously.

                                      Committee on Ways and Means,


      House of Representatives, Washington, DC, September 23, 
                                                         1998.

     Hon. Jerry Solomon,
     Rayburn House Office Building,
     Washington, DC.
       Dear Jerry: I am writing to express my support for what you 
     are trying to accomplish in H.R. 4213, the ``Savings and 
     Investment Relief Act of 1999.'' The Committee on Ways and 
     Means has long taken a jurisdictional interest in the fees 
     collected by the Securities and Exchange Commission. In our 
     view, these ``fees'' are taxes because they greatly exceed 
     the SEC's regulatory costs. We have worked for several years 
     with the Committees on Commerce and Appropriations to rectify 
     this problem.
       We last addressed SEC fees in the National Securities 
     Markets Improvement Act of 1996. That legislation was 
     intended to reform the SEC fee structure and bring the total 
     amount of fees down to the level of the SEC's budget. In a 
     letter to Chairman Bliley (whose committee has jurisdiction 
     over the SEC), I noted both my and his longstanding goal to 
     reduce these ``fees'' so that they truly are fees rather than 
     taxes. Although the extension and phase-down of SEC fees in 
     the Act was longer and slower than we would have preferred, I 
     recognized that it was the best that we could achieve under 
     the circumstances. I also noted that thee Committee on Ways 
     and Means reserved jurisdictional interest in this fee 
     structure, and that I would strongly oppose any attempts to 
     delay or lengthen the fee phase-down schedule provided by the 
     Act.
       The 1996 Act was a compromise that took years to achieve, 
     so I am cautious about modifying it. However, it has become 
     increasingly clear that actual fee collections, particularly 
     section 31 transaction fee collections, will exceed what we 
     estimated in 1996. Accordingly, I support your effort to cap 
     the section 31 transaction fees, provided that it does not 
     endanger the fee phase-down schedule in the 1996 Act and does 
     not create a PAYGO problem. Under such circumstances (and 
     without prejudice to the jurisdictional interest of the 
     Committee on Ways and Means), I would not seek sequential 
     referral of H.R. 4213 or have any objection to its 
     condieration by the House.
       I want to commend you for your tireless work and leadership 
     in this area. As always, you are watching out for taxpayers.
       With best personal regards,
           Sincerely,
                                                      Bill Archer,
                                                         Chairman.


     
                                  ____
                          Cosponsors H.R. 4213

       Representatives Menendez, Forbes, Foley, Ehrlich, Towns, 
     Houghton, Walsh, Scarborough, Gilman, Sessions, English, 
     Cook, Pappas, and Hall of Texas.
       Representatives Ramstad, Blagojevich, Largent, Christian-
     Green, Kelly, Armey, Hastert, Peterson of Pennsylvania, 
     Goode, Cox, Barton, Velazquez, Norwood, Deal, and Livingston.
       Representatives Hobson, Frelinghuysen, Riley, Sam Johnson 
     of Texas, Pitts, Cubin, Quinn, Dickey, Manzullo, Pickering, 
     McIntosh, Jackson-Lee of Texas, Barcia, and Chabot.
       Representatives Hostettler, Ryun, Fox, Pryce, McHugh, 
     Doolittle, DeLay, Boehlert, Boucher, Crane, Radanovich, 
     Boehner, Paxon, and Brady of Pennsylvania.


     
                                  ____
                               H.R. 4213

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. TRANSACTION FEES.

       (a) Amendment.--Section 31 of the Securities Exchange Act 
     of 1934 (15 U.S.C. 78ee) is amended by adding the following 
     new subsection:
       ``(h) Transaction Fee Limitation: Deposit of Fees.--
       (1) Limitation on transaction fees.--
       ``(A) In general.--For fiscal years 1999 through 2006, the 
     Commission shall not collect any fees described in 
     subsections (b), (c) and (d) which in the aggregate exceed:
       ``(i) $430 million during fiscal year 1999;
       ``(ii) $396 million during fiscal year 2000;
       ``(iii) $434 million during fiscal year 2001;
       ``(iv) $468 million during fiscal year 2002;
       ``(v) $511 million during fiscal year 2003;
       ``(vi) $557 million during fiscal year 2004;

[[Page E1875]]

       ``(vii) $607 million during fiscal year 2005; and
       ``(viii) $661 million during fiscal year 2006.
       ``(B) Publication.--The Commission shall publish annually 
     in the Federal Register notice of the fee limitations 
     described in this paragraph and any suspension of fees 
     pursuant to the limitations described in this paragraph.
       ``(2) Deposit of transaction fees.--
       ``A) General revenue.--Notwithstanding subsections (b), (c) 
     and (d), during fiscal years 1999 through 2006, fees 
     collected pursuant to subsections (b), (c), and (d) shall be 
     deposited and collected as general revenue of the Treasury, 
     in an amount not to exceed:
       ``(i) $247 million during fiscal year 1999;
       ``(ii) $271 million during fiscal year 2000;
       ``(iii) $299 million during fiscal year 2001;
       ``(iv) $328 million during fiscal year 2002;
       ``(v) $361 million during fiscal year 2003;
       ``(vi) $397 million during fiscal year 2004;
       ``(vii) $437 million during fiscal year 2005; and
       ``(viii) $481 million during fiscal year 2006.
       ``(B) Offsetting collections.--Notwithstanding subsections 
     (b), (c) and (d), during fiscal years 1999 through 2006, the 
     balance of any amounts collected pursuant to subsections (b), 
     (c), and (d) which are not deposited as general revenue 
     pursuant to paragraph (A) shall be deposited and credited as 
     offsetting collections to the account providing 
     appropriations to the Commission, to the extent provided for 
     in advance in appropriations Acts. If on the first day of a 
     fiscal year, a regular appropriation to the Commission has 
     not been enacted, the Commission shall continue to collect 
     fees (as offsetting collections) under this subparagraph at 
     the rate in offset during the preceding fiscal year, until 
     such a regular appropriation is enacted.''


     
                                  ____
                                                    U.S. Congress,


                                  Congressional Budget Office,

                               Washington, DC, September 24, 1998.
     Hon. Gerald B.H. Solomon,
     House of Representatives, Washington, DC.
       Dear Congressman: As you requested, the Congressional 
     Budget Office has prepared the enclosed cost estimate for 
     draft legislation to amend the Securities Exchange Act of 
     1934 to provide for an annual limit on the amount of certain 
     fees that may be collected by the Securities and Exchange 
     Commission, as provided by your staff on September 2, 1998.
       If you wish further details on this estimate, we will be 
     pleased to provide them. The CBO staff contact is Mark 
     Hadley.
           Sincerely,
                                                  June E. O'Neill.
       Enclosure.
                                  ____



               Congressional Budget Office Cost Estimate


   Draft legislation to amend the Securities Exchange Act of 1934 to 
provide for an annual limit on the amount of certain fees which may be 
          collected by the Securities and Exchange Commission

       Under current law, the Securities and Exchange Commission 
     (SEC) charges national securities exchanges, national 
     securities associations, brokers, and dealers transaction 
     fees equal to 1/300 of a percent of the aggregate dollar 
     amount of sales of securities. Fees from national securities 
     associations are subject to appropriation action and are 
     recorded as offsetting collections, which are credited to 
     appropriations as an offset to discretionary spending. Fees 
     from other sources are recorded as revenues (governmental 
     receipts).
       The draft legislation would change the budgetary treatment 
     of these fees and would limit the total amount that could be 
     collected each year. It would require that all fees be 
     recorded as revenues until certain annual targets are 
     reached. Once the target for a year is reached, any 
     additional fees would be recorded as offsetting collections. 
     The proposal specifies as the annual revenue targets the 
     amounts of revenues projected under current law in CBO's 
     March 1998 baseline, starting at $247 million for fiscal year 
     1999 and increasing to $481 million for fiscal year 2006. The 
     draft legislation also would impose annual limits on the 
     total amount of transaction fees collected (that is, the sum 
     of revenues and offsetting collections). These limits would 
     grow from $430 million in 1999 to $661 million in 2006. As 
     under current law, authority to spend the amounts deposited 
     as offsetting collections would be available only to the 
     extent provided in appropriation acts.
       CBO estimates that the limits on aggregate SEC fees would 
     reduce total fees collected by the government by about $385 
     million over the 2000-2003 period, but would probably not 
     affect the amounts of such fees that are recorded as revenues 
     over that period. They would, however, reduce the amount of 
     offsetting collections and would thereby necessitate higher 
     net appropriations for the SEC, assuming that the agency's 
     gross spending authority is maintained at or near its 1998 
     level of $283 million.
       For purposes of this estimate, CBO assumes that the draft 
     legislation will be enacted near the start of fiscal year 
     1999 and prior to enactment of the 1999 appropriation for the 
     SEC. The proposal could decrease revenues, if revenues (as 
     defined under current law) would otherwise exceed the annual 
     caps on transaction fees specified in the draft legislation. 
     However, CBO estimates that the proposal would probably not 
     affect revenues--at least for fiscal years 1999 through 
     2003--because the cap on total fees in each year is 
     significantly above the CBO baseline projections for 
     revenues. (For example, the cap in 2003 is $511 million, 
     while CBO projects revenues under current law of $361 million 
     in that year.)
       The caps on total fees would effectively limit offsetting 
     collections in 1999 to CBO's baseline projection. Starting in 
     2000, the caps would gradually reduce offsetting collections, 
     so that by 2006 such collections would be $176 million less 
     than the CBO baseline projection for that year. The following 
     table shows CBO's estimates of fee collections under current 
     law as well as under the Solomon proposal.

                                                   SEC FEES UNDER CURRENT LAW AND THE SOLOMON PROPOSAL
                                                        [By fiscal year, in millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      CBO Baseline Projections               Under Draft Legislation
                                                              ------------------------------------------------------------------------------  Estimated
                         Fiscal Year                                         Offsetting                             Offsetting                Change in
                                                                 Revenues   Collections     Total       Revenues   Collections     Total      Total Fees
--------------------------------------------------------------------------------------------------------------------------------------------------------
1999.........................................................          247          183          430          247          183          430            0
2000.........................................................          271          201          473          271          125          396          -77
2001.........................................................          299          221          520          299          135          434          -86
2002.........................................................          328          244          572          328          140          468         -104
2003.........................................................          361          268          629          361          150          511         -118
2004.........................................................          397          295          692          397          160          557         -135
2005.........................................................          437          324          761          437          170          607         -154
2006.........................................................          481          357          837          481          180          661         -176
--------------------------------------------------------------------------------------------------------------------------------------------------------

       To implement the draft legislation, the SEC would need to 
     upgrade its fee tracking systems, but CBO estimates that this 
     would not have a significant impact on the federal budget. 
     Any such impact would be subject to appropriation action.
       Because the draft legislation could affect governmental 
     receipts, pay-as-you-go procedures would apply, but CBO 
     estimates that it would have no effect on revenues for any 
     year over the 1999-2003 period (the years for which pay-as-
     you-go procedures apply). Moreover, the proposal would not 
     affect direct spending. The bill contains no 
     intergovernmental or private-sector mandates as defined in 
     the Unfunded Mandates Reform Act and would have no 
     significant impact on the budgets of state, local, or tribal 
     governments.
       The CBO staff contact is Mark Hadley, who can be reached at 
     226-2860. This estimate was approved by Robert A. Sunshine, 
     Deputy Assistant Director for Budget Analysis.