By Dani Klein, Congress Watch intern
On Tuesday, July 26, U.S. Senator Brian Schatz (D-Hawaii) and U.S. Representative Val Hoyle (D-Ore.) reintroduced the Wall Street Tax Act of 2023. This bill would levy a 0.1% tax on trades of stocks, bonds, and derivatives, a kind of tax that is also called a financial transaction tax (FTT).
The Wall Street Tax Act of 2023 comes on the heels of a similar bill introduced by Senator Bernie Sanders (I-Vt.) and Representative Barbara Lee (D-Calif.), the Tax on Wall Street Speculation Act, which also aims to reinstate an FTT in the U.S. as a key step toward ensuring that Wall Street pays its fair share of taxes.
52 organizations, led by Public Citizen, signed a letter endorsing the Wall Street Tax Act, citing the importance of an FTT as a tool to combat systemic economic inequality. The letter states that it is “unconscionable that the recent debt limit deal to avoid a catastrophic default included inflation-adjusted cuts in crucial programs from nutrition assistance to health care to environmental enforcement to Head Start and much more at a time when we should be increasing spending to address income inequality and America’s other pressing problems.”
The letter argues that to address funding crises, the government should not turn to cutting funding for programs that are essential for marginalized Americans. Instead, the government should seek to generate the necessary revenue by insisting that corporations and the super-rich pay their fair share of taxes, including Wall Street high rollers paying a financial transaction tax.
FTTs are far from a new idea — the United States has had multiple FTTs in its history, and some kinds of financial transactions are already taxed at an extremely low rate to fund the Securities and Exchange Commission. Many major global economies such as those of the UK, Brazil, Switzerland, and South Korea currently use some form of FTT.
A small tax on financial transactions, such as Schatz’s and Hoyle’s 0.1% tax, would not seriously impact the work and profits of traditional investors, but for those who chase small gains through high frequency trading, the tax would disincentivize their speculative strategies. By making high-speed trading less lucrative (or at least allowing the American people to profit off high-speed trade earnings as well), an FTT could help decrease market volatility and would help reorient Wall Street’s focus to long-term investments that support American businesses and communities.
By using an FTT to address income inequality and ensure that Wall Street and the wealthy pay their fair share, the U.S. would gain more than $750 billion in revenue over 10 years. The American people deserve to have these funds be devoted to strengthening public programs and supporting underfunded federal agencies.
While it has been argued that an FTT could have an adverse effect on retirement accounts or on American individuals’ stock portfolios, an average middle-income family with a retirement account would only experience about $13 in annual costs from an FTT. Additionally, about 40% of the U.S. population does not own any stock market wealth at all, even through a retirement account. The share of households of color that own stock market wealth is even smaller. However, when a crisis hits Wall Street, America’s most vulnerable populations feel the economic shockwaves the most, and the government is often not equipped with the funding to help them adequately.
It is time to ensure that Wall Street pays its fair share of taxes. The Wall Street Tax Act will allow the U.S. government to address both the dangers of an unstable Wall Street and the consequences of underfunded public programs. A financial transaction tax is a win-win for the American people.