Taxation of Financial Products: Options for Fundamental Reform

Abstract

The following is testimony to the joint hearing of the House of Representatives Committee on Ways and Means and the Senate Committee on Finance. The testimony discusses three benchmarks for evaluating the taxation of capital income in general and financial instruments in particular, summarizes three broad-based approaches to reforming the tax treatment of financial products, evaluates the impact of other fundamental reforms on the urgency of reforming the taxation of derivatives, and urges Congress to encourage the IRS to make detailed tax return data available for empirical research of revenue costs and other losses arising from derivatives-based tax planning.

Keywords: taxation, derivatives, financial instruments, fundamental reform