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June 30, 1999

Hearings Likely on Fee Cap As SEC Assessments Soar

By William Hoffman

The sponsor of legislation to cap Section 31(a) transaction fees expects the House Commerce Committee to hold hearings sometime before Congress's August recess, a spokesman said.

"The bill seems to be moving along very nicely," said Craig Donner, press secretary to Rep. Vito Fossella (R-N.Y.), the sponsor of H.R. 1256, the "Savings and Investment Relief Act of 1999."

Fossella's bill would place a dollar cap on the sum of Section 31(a) transaction fees that the Securities and Exchange Commission could collect in any fiscal year.

The cap starts at $463 million for fiscal 2000, and ratchets up to $889 million in fiscal 2006. That's still well in excess of the commission's current $315 million budget, which the fee is designed to fund, critics of the present fee-structure note.

Total Raised

The uncapped 31(a) fee this year is expected to raise $500 million of an estimated $1.2 billion in assessments the SEC will collect and deposit in the U.S. Treasury Department's general revenue fund. The SEC's budget is appropriated from this fund. The remainder of the 31(a) fees may be distributed any way Congress decides.

"Which makes it a tax on investors," said Peter Cleary, communications manager for Americans for Tax Reform in Washington, the group founded by Ronald Reagan-era tax hawk

Grover Norquist (who quadrennially swears presidential hopefuls to his no-tax-hike pledge). Americans Tax Reform was joined by the Security Traders Association, the National Taxpayers Union, and the U.S. Chamber of Commerce to push for passage of the fee cap.

The bill has 39 cosponsors, including House Majority Whip Rep. Tom DeLay (R-Texas.

Donner said Fossella believes the legislation has a good chance of clearing the Commerce Committee for a vote on the House floor after the committee's work on H.R. 10, the Financial Services Modernization bill, is completed in the next few weeks.

If the bill passes the Commerce Committee, Cleary said, it should pass the House. H.R. 1256's lead co-sponsor is chief deputy minority whip Rep. Robert Menendez (D.-N.J.), Cleary noted. And companion legislation will likely be shepherded through the Senate by Senate Banking Committee Chairman Sen. Phil Gramm (R-Texas), a supporter of a fee cap.

Would President Clinton veto a Section 31(a) cap?

"These kinds of things are not Wall Street issues," Cleary said. "They're Main Street issues."

Half the Nation

With nearly half the nation's population invested directly or indirectly in the stock market, Cleary pointed out, there's a large number of Americans paying 31(a) fees who have never even heard the term. Cleary doesn't think President Clinton will interfere.

"I think most people would see this as a positive step," Donner added. "You're reducing the tax on capital. You're reducing the tax on investing. We haven't seen any real opposition to capping the fee."