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White House and Congress Must Back Financial Speculation Tax, Diverse Array of Groups Say on Tax Day

April 15, 2010

White House and Congress Must Back Financial Speculation Tax, Diverse Array of Groups Say on Tax Day

As G20 Summit Looms, Wall Street and Economic Experts, Labor Leaders, Consumer, Development and Global Health Advocates Come Together, Say Small Levy on Financial Transactions Is Idea Whose Time Has Come

WASHINGTON, D.C. – The White House and Congress should embrace a financial speculation tax, an idea whose time has come because it would help curb excessive speculation and raise billions of dollars for critical needs, a diverse array of groups said at a press conference today, Tax Day.

The groups – which included Wall Street and economic experts, labor leaders, and consumer, development and global health advocates – called on President Barack Obama and Treasury Secretary Timothy Geithner to support the financial speculation tax, and on Congress to move swiftly to enact it.

“Wall Street should pay to clean up the economic mess they made – that’s why the AFL-CIO and the global labor movement support a financial speculation tax that encourages long term investment that creates jobs,” said Damon Silvers, director of policy and special counsel for the AFL-CIO.

Added John Fullerton, a former managing director at JPMorgan, who also spoke at the press conference, “Short-termism is now widely recognized as a core illness in our financial system. The financial transactions tax is not a cure all for this or any disease, but at the margin it will shift capital allocation away from short-term speculative activities toward longer-term investment while improving system resilience and raising much needed revenue in the process.”

U.S. Sen. Tom Harkin (D-Iowa) said that “At a time when the deficit is rising, we must find ways to reduce the debt without putting a heavy burden on average Americans or cutting necessary services. A small transaction tax can raise substantial funds with virtually no effect on middle-class families. And it has the added effect of dampening down overly speculative trading, which is partially to blame for the recent economic crash.”

A financial speculation tax, also known as a financial transactions tax, is a very small levy on financial short-term transactions. It would curb excessive speculation by big banks, but with minimal impact on long-term investors. It also would raise an estimated $100 billion a year for creating jobs, important public investments like rebuilding our nation’s crumbling infrastructure, providing global health and development aid, and mitigating the impact of climate change. Other countries have a form of the tax, and the U.S. had it until the mid-1960s.

“It makes sense to tax what we don’t like,” said Robert Weissman, president of Public Citizen. “A speculation tax promises to slow the dangerous churning on Wall Street, pare down an oversized financial sector and raise $100 billion annually in a very progressive fashion. That’s a winning formula, and why a speculation tax is likely to become the law of the land, despite intense Wall Street opposition.”

“Greed and negligence led to a deep economic recession that thrust 100 million people around the world into absolute poverty,” said Raymond C. Offenheiser, president of Oxfam America. “The financial speculation tax would not only help prevent the next crisis, but also help raise much needed funds to help pick up the pieces of the millions of people around the world who suffered the consequences and invest in the resiliency of communities on the front lines of climate change.”

Added Paul Zeitz, executive director of the Global AIDS Alliance, “In countries hardest hit by poverty and disease, especially in Africa, many rely on the public health sector for health care. But, the economic crisis has put access to these services in jeopardy. In addition to
fighting for full funding of U.S. government global health commitments, we must also look to innovative financing mechanisms, like a financial speculation tax, to help continue providing life-saving medicines to treat the growing impacts HIV/AIDS, tuberculosis, malaria and expand access to treatment of long neglected diseases.”
Momentum for enacting a financial speculation tax is already strong in Europe. It will be on the agenda at G20 finance ministers’ meeting in Washington, D.C., on April 23 and the G20 leaders’ meeting in Canada in June.

“The reckless behavior of a severely bloated financial sector has given us the worst economic downturn in 70 years,” said Dean Baker, co-director of the Center for Economic and Policy Research. “A tax on financial speculation would raise close to $100 billion a year, while downsizing the financial sector and restoring it to its proper role in the economy, which will help ensure that this sort of calamity does not happen again.”

Added Sarita Gupta, executive director of Jobs with Justice, “Jobs with Justice will be in the streets today in over 40 cities demanding that Congress tax Wall Street to pay for jobs. Wall Street bankers recklessly gambled away our economy, and they should be made to pay for recovery programs like the Local Jobs for America Act.”