Public Citizen Supports Harkin-DeFazio Wall Street Trading and Speculators Tax Act to Raise Needed Revenue and Rein In Rampant Market Speculation
Feb. 28, 2013
Public Citizen Supports Harkin-DeFazio Wall Street Trading and Speculators Tax Act to Raise Needed Revenue and Rein In Rampant Market Speculation
Financial Speculation Tax Would Help Strengthen and Stabilize Economy
WASHINGTON, D.C. – The Wall Street Trading and Speculators Tax Act, introduced today by U.S. Sen. Tom Harkin (D-Iowa) and U.S. Rep. Peter DeFazio (D-Ore.), would raise significant revenue while also helping to protect the economy against market instability, Public Citizen said today.
This legislation would charge a miniscule 0.03 percent tax (3 pennies on $100) on the sale or transfer of stocks, bonds and derivatives. According to the nonpartisan Joint Committee on Taxation, a 0.03 percent tax on financial transactions would generate approximately $352 billion over nine years.
“Lawmakers should be striving to counteract the devastating sequestration cuts scheduled to begin taking effect Friday, and this option is a practical way to do just that,” said Lisa Gilbert, director of Public Citizen’s Congress Watch division. “In addition to raising substantial revenue, a financial speculation tax would help stabilize the market by reducing dangerous and predatory trading strategies.”
Marginally raising transaction costs would make high-speed traders’ risky activities less profitable and even discourage them. The Harkin-DeFazio bill also would encourage long-term and productive investment.
“Markets are supposed to function as intermediaries, connecting investors who provide capital with producers who put that capital to work, spurring new innovations and job creation,” said Micah Hauptman, financial policy counsel for Public Citizen’s Congress Watch division. “This bill provides an approach that protects vital investments while targeting excessive trading and speculation that hurts our economy.”
The Wall Street Trading and Speculators Tax Act would have virtually no negative impact on the vast majority of Americans’ investment activities. The bill specifically protects middle-class investors by providing tax credits for contributions to tax-preferred retirement, education and health savings accounts, including 401(k)s, 403(b)s, IRAs and 529s, among others.
One of the biggest industry criticisms of the financial speculation tax is that increasing transactions costs would cause trading to flow overseas. That argument is without merit. Currently, at least 29 countries tax financial transactions. The United Kingdom has a transfer tax on stocks, as do other vibrant market centers such as Hong Kong, Singapore, Taiwan, South Korea, Australia and Switzerland. And most recently, 11 countries in Europe, led by Germany, France, Spain and Italy, agreed to implement a financial speculation tax; it is expected to take effect by the end of the year.
With so many countries having successfully implemented, or being in the process of implementing financial transaction taxes, at even higher rates than the one proposed by Harkin and DeFazio, there are fewer places for traders to escape taxation on their activities.
“Regular people pay sales tax when they buy a cup of coffee; it’s time for Wall Street to pay a tax on its speculative financial trading,” said Robert Weissman, president of Public Citizen. “Public Citizen strongly supports the Harkin-Defazio legislation to tax Wall Street.”
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