The following Senators received the letter printed below: Senate Majority Leader Trent Lott, Senate Minority Leader Tom Daschle and Senator Judd Gregg
March 13, 2001
Citizens for a Sound Economy (CSE) is a 280,000 member organization committed to the principles of economic liberty and limited government. CSE has been closely following policy developments affecting capital markets and working to reduce regulatory costs for consumers since our founding in 1984. On behalf of CSE, I write to encourage you to act to substantially reduce the excess fees charged by the Securities and Exchange Commission.
Since 1983, the SEC has been running a budget surplus annually. According to Congressional Budget Office (CBO) estimates, in 2001 the fees collected by the SEC will be in excess of five times its $422.8 million operating budget.
Senators Phil Gramm and Chuck Schumer address this problem with S. 143, the “Competitive Market Supervision Act of 2001.” The legislation would allow the SEC to collect only enough in fees to fund the Commission’s budget.
This is a welcome step. Current SEC fees, particularly Section 31 fees on securities transactions, are a punitive tax on investment capital. According to estimates provided by the Senate Banking Committee, the average middle class worker pays $1304.55 in excessive SEC fees over her lifetime. When compounded over a 45-year working lifetime at a conservative 6 percent rate of return, a two-wage family would lose $11,600 to the bloated SEC budget.
All told, Section 31 fees amount to a one billion dollar drag on capital markets. Due to the high trading volume of recent years, the seemingly puny tax-1/300 of one percent of the total dollar amount of securities sold-collects more than $3 million on the average trading day. Because the fee taxes the revenue of brokerage houses and financial service providers, consumers also pay the price of decreased liquidity and reduced efficiency in capital markets.
The detrimental economic effects of SEC fees have been ignored to a large extent because the revenue they collect goes to the general treasury. This practice would end as a result of S. 143 and an estimated $12 billion in excess fees would return to capital markets over the next five years.
S. 143 mandates that fees collected during any fiscal year be deposited and credited as offsetting collections. This is an important step, but should not provide the means for the SEC to expand its operating budget. Conscientious members of Congress should bear in mind that every dollar not appropriated for administrative costs at the SEC would go directly to capital markets. Because of this fact, it is disappointing that S. 143 includes a pay-parity provision that would increase SEC appropriations.
A substantial reduction in fees paid directly by consumers would result from S. 143 and thus provide investment capital and added liquidity to security markets. At CSE, we believe that it is imperative for the Senate to act swiftly to eliminate this substantial overcharge.