Finally, there is a sign that those in Washington are hearing the cries from protestors around the country about making Wall Street pay for the damage they have done to the economy.
Legislation imposing a financial transaction tax was introduced today in the Senate by Sen. Tom Harkin, D-Iowa, and in the House by Rep. Peter DeFazio, D-Ore, that could raise somewhere between $700 billion and $1.2 trillion over 10 years, The Huffington Post reported.
The transaction tax was first proposed in the 1970s by the late American economist and Nobel Prize Winner James Tobin, as The Washington Post noted. Hundreds of economists and responsible investors support the tax, including Nobel Laureates Paul Krugman and Joseph Stiglitz, stock market billionaire Warren Buffet and former Goldman Sachs Chairman John Whitehead. Some in the 1% agree with the 99% about taxing Wall Street.
The legislation would impose a transaction tax of 0.03% on every single trade of stocks, bonds, options, futures, swaps, and credit default swaps. It would be a small cost for those who are saving for retirement or a child’s education; the average person paying into a 401(K) would pay only one dollar per year. The bill has its greatest impact on investors who engage in constant, high-volume trading, not ordinary workers who barely touch their investment until they need it.
The United States is not even the first country to consider a financial transaction tax. In September, the European Union proposed a financial transaction tax of its own that would take effect in 2014, said Bloomberg Businessweek. It is estimated that the financial transaction tax for the EU could raise about 57 billion euros, or $78 billion a year. The EU proposal would apply a tax of 0.1% on trade stocks and bonds, higher than the financial transaction tax in the U.S.
The financial transaction tax will also be a major issue at the upcoming G-20 summit in Cannes, France, where the United States will be a major player. The introduction of the bill gives the United States a possible elevated role in the international debate over the financial transaction tax. President Obama should voice his support of the financial transaction tax at the G-20 summit and join other countries that already have the tax as law, such as the United Kingdom and Hong Kong.
The AFL-CIO and National Nurses United both back the lawmakers’ bill and have also scheduled a rally in front of the Treasury Department on November 3. Other major labor organizations are already on board and have started to take their support of the Wall Street tax to Treasury Secretary Timothy F. Geithner in person. The U.S. Chamber of Commerce and the Business Roundtable have both voiced their opposition to the financial transaction tax.
There is now a massive movement by organizations to get the support of the public on the financial transactions tax. Americans for Financial Reform is circulating petitions in support of the Wall Street tax along with Rebuild the Dream and MoveOn.org. The petitions will allow the public to voice their support for the Wall Street tax and send a message to Washington to pass the bill.
The financial transaction tax is especially relevant today because of the upcoming decision by the congressional deficit-reduction supercommittee that is in charge of finding $1.2 trillion in savings before the end of the month. This financial transaction tax is a great idea to raise revenue instead of cutting programs such as Social Security and Medicare.