This fight has been heavily skewed in favor of corporate interests.
By Beth Markman
$73 million. That’s how much groups that lobby on a proposed Wall Street tax combined contributed to congressional campaigns in the 2018 and 2020 election cycles.
Proposals to institute a small tax on most trades of stocks, bonds, and derivatives trades would raise substantial revenue and reduce high-speed trading without imposing significant financial costs on everyday Americans. Because of these benefits, proposals to implement a Wall Street tax — also called a financial transaction tax or FTT — have been gaining support in Congress. But, a new report from Public Citizen titled “Hypnotized by Wall Street’s Lobbying and Campaign Contributions” details how many huge financial firms and lobbying behemoths are fighting the policy.
Various bills to tax trades have been introduced including the Wall Street Tax Act, sponsored by Rep. Peter DeFazio (D-Ore.) and Sen. Brian Schatz (D-Hawaii), and the Tax on Wall Street Speculation, introduced by Rep. Barbara Lee (D-Calif.) and Sen. Bernie Sanders (I-Vt.).
Everyday investors would experience minimal to no costs from a Wall Street tax. The tax would predominantly affect high-frequency traders and hedge funds that use algorithmic trading processes, as well as day traders. The tax would cost half of Americans absolutely nothing because half of American families do not own retirement accounts or other investments. For families that do have investments, the reduced fees from decreased portfolio turnover very well may totally offset the tax. The actual cost of the tax to regular families would be tiny. A 2019 Public Citizen report estimated that an average middle-income family with typical investments would only pay $13 a year from a 0.1% tax.
However, financial services entities and other corporate lobbying giants are putting enormous amounts of money behind their efforts to prevent a Wall Street tax from passing. The largest campaign contributor in the 2018 and 2020 cycles was Charles Schwab, which gave $13.9 million in total.
Groups on both sides of this issue are lobbying, but those opposing the FTT have significantly more lobbyists and more campaign money, causing an unfair fight that leaves average Americans’ voices underrepresented. There are many advocacy groups that are championing the FTT, including a coalition of 68 groups that signed a letter to Congress in favor of the Wall Street Tax of 2021. However, many of these organizations engage in public education and grassroots organizing instead of lobbying.
The difference in lobbying power is striking: nine out of the ten organizations that have the most lobbyists working on FTT issues strongly oppose the tax. The three organizations with the most lobbyists fighting the FTT are all lobbying giants: the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association and the Investment Company Institute.
Anti-FTT lobbying groups are strategically targeting contributions at specific members of Congress that are central to the passage of the FTT and investment related bills. Rep. Patrick McHenry (R-N.C.), Ranking Member of the U.S. House Financial Services Committee, is arguably the most vocal opponent of the FTT in Congress. He received the second highest amount of money from FTT lobbying groups out of any member of the House. McHenry received $703,930, combined, in the 2018 and 2020 election cycles.
The FTT has not even received a dedicated hearing in Congress in recent years despite support from unions and nonprofits, as well as endorsements from multiple presidential candidates during the 2020 race, including then-candidate Joe Biden. The lack of movement of this tax through Congress is likely in part because of opposition from key members of Congress who receive enormous donations from anti-FTT organizations.
It is our hope that by revealing just how skewed this fight has been in favor of corporate interests, members of Congress will feel pressure to give a Wall Street tax a fair hearing in full public view.