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Four Financial Industry Interests Publish Deceptive Papers on the Financial Transaction Tax

Evidence Suggests That the Papers Likely Were Orchestrated

WASHINGTON, D.C. – Four recent industry papers on the impact of a tax on Wall Street trades, called a financial transaction tax, are riddled with methodological inaccuracies and mysteries, and should be discounted, Public Citizen warned today in a new report.

The papers were put forth in September by the U.S. Chamber of Commerce, the Modern Markets Initiative (MMI), mutual fund firm Vanguard and the Committee on Capital Markets Regulation. Public Citizen’s report shows that each of the industry papers either relied on assumptions that conflict with real-world data or omitted key details of its methodology.

“To the extent that they explain their methodology, these industry papers assume that mutual funds trade stocks much more often than average mutual funds actually do,” said Susan Harley, deputy director of Public Citizen’s Congress Watch division. “The industry’s approach is like trying to estimate Americans’ fuel bill by first assuming that an average family drives a gas-guzzling Hummer.”

Industry has only sporadically issued studies on the FTT in the past. The rapid succession with which the industry papers were released, along with the papers’ similar rhetoric and conclusions, suggests that they likely were orchestrated. Some of the members and principals associated with the groups overlap, as well. For instance, the author of the U.S. Chamber report is a member of MMI’s advisory board, and a member of the Committee on Capital Markets Regulations is an executive of one of the companies that founded MMI.

Additionally, all four groups have a financial interest in the proposed tax. For example, Vanguard is funded by revenue from its business, MMI was founded and is funded by four firms engaged in high-frequency trading, and the Committee on Capital Markets Regulation consists primarily of executives in the financial services sector.

In contrast to the claims in the industry papers, Public Citizen recently issued a report concluding that a 0.1% financial transaction tax would cost an average middle-income family about $13 a year if the family has a retirement account. For the roughly half of American families who do not have retirement accounts, costs resulting from an FTT likely would be zero, the report said.

Read the full report.