Sen. Tom Harkin (D-IA) and Rep. Peter DeFazio (D-OR) recently introduced the Wall Street Trading and Speculators Tax Act (S. 1787/H.R. 3313), which would raise much needed federal revenues by imposing a tiny .03% tax on Wall Street speculation and financial transactions, including trading of stocks, bonds, futures, options and swaps. This progressive tax would generate additional federal revenues from the wealthiest Americans, large profitable corporations, and financial institutions, which would be used to create jobs, maintain vital public services, strengthen infrastructure, and reduce the federal deficit. The tax would also help to better match the interests and incentives affecting pension funds and investment managers. AFSCME, the AFL-CIO, and many other organizations have endorsed this legislation. It is a type of “financial transaction tax.” Members of Congress are considering other related proposals and AFSCME generally supports these types of taxes.
Dear Senator Harkin and Congressman DeFazio,
As President of the International Federation of Professional and Technical Engineers (IFPTE), I am writing to endorse the Wall Street Trading and Speculators Tax Act. This legislation is a huge step in the right direction by providing a modest, but much needed, financial transactions tax (FTT) on Wall Street trading activity.
Consistent with the spirit of IFPTE’s revenue raising recommendations to the Joint Select Committee on Deficit Reduction (the Super Committee), your legislation calls for the implementation of a very small 0.03% FTT on, among other things, the risky practice of high-volume speculative trading. The modest tax will be assessed on the trading of stocks, futures, bonds, credit defaults and swaps. Contrarily, ATM withdrawals, buyer home mortgages, short term revolving loans, and other everyday financial activities will not be taxed, while rates on retirement accounts and mutual funds are so low that there is no practical impact. For example, the average 401k investment in a year is $3800, which means a tax payment of one dollar. However, it will tax brokers, institutional investors and day traders.
We understand that your bill has yet to be scored, but we have little doubt that it will result in significant revenues to the U.S. Treasury. Our confidence is based on a 2009 joint report by the Center for Economic Policy Research (CEPR) and the Political Economy Research Institute, which estimated that between $177-354 billion in annual revenue could be raised by taxing financial transactions in the United States. While the report relies on a transaction tax rate that varies between 0.01% and 0.5%, the end result is significant income into the federal treasury, along with a disincentive for rogue speculative investment practices.
It is IFPTE’s hope that your bill provides the twelve members of the Super Committee with a blueprint for a viable deficit reduction option in lieu of forcing American workers to again pick-up the lion’s share of the deficit burden facing our nation. With an unemployment rate that continues to exceed 9%, more and more Americans losing their homes, healthcare, educational opportunity… it is time for Wall Street to finally pay their fair share.
Dear Senator Harkin and Representative DeFazio:
On behalf of the 3.2 million members of the National Education Association (NEA), we would like to express our support for the Wall Street Trading and Speculators Tax Act. We thank you for your leadership on this legislation and your efforts to ensure that all pay their fair share toward economic recovery.
Three years after the financial meltdown and a taxpayer bailout, Wall Street is booming with record profits and bonuses. At the same time Main Street is still suffering as families continue to struggle to find work and feed their children. It is fair and practical to ask Wall Street to do more to aid economic recovery.
The single largest contributing factor to the current deficit is the tax cuts enacted under the last administration and renewed in 2010. It cost our nation $700 billion to extend the tax cuts for single filers earning over $200,000 a year and joint filers earning over $250,000. CBO numbers show that by the end of this decade well over half of the deficit will have resulted from these tax cuts, and this share will continue to grow after that. Yet, some policy makers want to balance the budget on the backs of working families, children, and seniors. We simply cannot demand more from those barely scraping by while continuing to give Wall Street a free pass.
Congress must find innovative revenue raisers that reduce our deficits, keep the federal government running, and ensure a progressive federal tax base. We believe the Wall Street Trading and Speculators Tax Act offers such a proposal. By assessing a tiny 0.03 percent tax on trading of stocks, bonds, futures, options, swaps, and credit default swaps, your bill would raise significant revenue, while simultaneously discouraging reckless short-term speculative trading that can threaten financial stability.
We believe the Wall Street Trading and Speculators Tax Act offers a common-sense, financially sound proposal to raising revenues while discouraging risky trading that has created unstable, volatile markets. We thank you for your leadership on this important issue and look forward to working with you to ensure a fair, balanced approach to deficit reduction.
This legislation would introduce a small fee of 3 basis points – just 3 cents per $100 -- on the trading of stocks, bonds, futures, options, swaps, and credit default swaps. The scale of speculative Wall Street trading means that this tiny fee would raise hundreds of billions of dollars over the next decade while simultaneously limiting the reckless short-term speculation which was responsible for the “flash crash” of 2010 and contributed to the 2008 financial crisis.
Many of the economic problems we face today, from deficits to unemployment, were in large part created by the world financial crisis. This crisis was created by Wall Street speculation. It is therefore appropriate that we call on Wall Street for a fair contribution to help address it.
The idea of a tax on speculation is not a new one. Such taxes have a long track record both in the United States and globally. The United States had a transfer tax from 1914 to 1966 which levied a small fee on all sales or transfers of stock. The UK levies a transaction tax of one half percentage point on stock transfers and has done so for many decades.
The European Union is currently proposing a tax of ten cents per $100 on all trading of shares and bonds, as well as a smaller tax on derivatives transactions. The French and German governments have already endorsed this idea. Asian countries such as Hong Kong, Taiwan, South Korea, and India also currently levy securities transaction taxes.
There is no question that even an extremely low fee on the vast market in financial transactions would generate significant revenue. The value of the U.S. market in stocks and bonds alone exceeds $40 trillion, and the nominal value of derivatives transactions is several times that. The official European Union revenue estimate for their transaction tax proposal has found that the EU tax of ten cents per $100 will raise over $70 billion annually from the European financial markets and close to a trillion dollars over the next decade. The smaller tax proposed in this legislation will clearly raise hundreds of billions of dollars over the next decade when levied on U.S. financial markets, which are larger than those in Europe.
Beyond the revenues to be raised, the speculation tax in this legislation would have the salutary effect of discouraging the kind of high frequency trading that has increased harmful volatility in financial markets and was responsible for the “flash crash” last year. High frequency traders often hold stocks for only fractions of a second and do not generally contribute to the capital markets? purpose of long-term price discovery. A financial transaction tax would create economic benefits by channeling resources away from such unproductive short-term speculation and toward more useful purposes.
Read more: http://ourfinancialsecurity.org/blogs/wp-content/ourfinancialsecurity.org/uploads/2011/11/AFR-Supports-DeFazio-HR-3313-11-2-11.pdf