Banking and Finance Law Daily ‘Wall Street’ tax proposed, intended to curb speculative trading
Wednesday, March 6, 2019

‘Wall Street’ tax proposed, intended to curb speculative trading

By Colleen M. Svelnis, J.D.

A new financial transaction tax introduced in Congress, intended to reduce speculative trading, would tax the sale of stocks, bonds, and derivatives at a rate of 10 cents per $100 of Wall Street transactions.

Senators Brian Schatz (D-Hawaii) and Chris Van Hollen (D-Md), along with Rep. Peter DeFazio (D-Ore) have introduced legislation to create a new "Wall Street Tax" on financial transactions. S. 647, The Wall Street Tax Act of 2019, is intended to reduce unproductive and speculative trading. The bill is intended to address economic inequality and reduce high risk and volatility in the market, and to redirect investment from these transactions into more productive areas of the economy. The bill is also intended to reduce the risk of financial crashes and limit the risks that high-speed arbitrage poses to the financial system

The Act would tax the sale of stocks, bonds, and derivatives at a rate of 10 cents per $100 of transactions, and is estimated to raise over $775 billion over a decade. A stock trade of $1,000 would incur a tax of one dollar. The tax would apply to the fair market value of equities and bonds, and the payment flows under derivatives contracts. Initial public offerings and short-term debt (with a maturity of less than 100 days) would be exempted. "Over the last decade, Wall Street has made record profits from high-risk trades that have made the market dangerously volatile, while doing nothing to add real value to our economy or raise wages for workers," said Schatz. "My bill will help discourage this kind of risky, volume-based trading and bring in billions in new revenue." Defazio stated that the legislation "will curb unnecessary speculation and generate much-needed revenue to help the federal government fund national priorities and invest in the real economy to benefit all Americans."

"Volatile, high-volume trading is great for Wall Street traders who can make millions off of fluctuations," said Sen. Jeff Merkley (D-Ore), a co-sponsor of the bill. "But it does nothing to help middle-class families or to invest in jobs and innovation. This legislation restores balance to our markets while raising revenue for key priorities that help working families."

Community groups endorse bill. A coalition of 61 organizations has sent a letter to all members of Congress advocating for the bill. The financial transaction tax (FTT) would mainly affect Wall Street firms and high-frequency traders who hold financial instruments for a very short time, usually minutes, as opposed to long-term investors. According to the letter, the FTT’s impact on retirement savings would be negligible. The letter asserts that the FTT would "help retirees and middle-class investors by capturing returns lost to short-termism and reducing portfolio churn and volatility." The legislation would help reorient Wall Street’s focus to long-term investments that support Main Street businesses; be one step toward having Wall Street pay more of its fair share of taxes; and raise nearly $777 billion in revenue over the next decade, according to the letter.

Take on Wall Street coalition member Americans for Financial Reform endorsed the bill, stating that the small fee on financial transactions would play an important role in curbing high-frequency trading, reducing risk and volatility in financial markets and raising an estimated $777 billion in new revenue over 10 years. AFR states that it would push Wall Street away from extremely shortterm speculation, and towards longer-term investments that can contribute to the real economy, and it requires Wall Street to pay more of its fair share in taxes.

Companies: Americans for Financial Reform; Action Center on Race and the Economy;; Affordable Homeownership Foundation, Inc.; AFL-CIO; American Family Voices; American Federation of State, County and Municipal Employees; American Federation of Teachers; Americans for Democratic Action; Americans for Financial Reform; Americans for Tax Fairness; Asset Building Strategies; Campaign for America's Future; Center for Popular Democracy Action; Coalition on Human Needs; Communications Workers of America; Congregation of Our Lady of Charity of the Good Shepherd, US Provinces; Consumer Action; CREDO Action; Demos; Economic Policy Institute Policy Center; Franciscan Action Network; Friends Committee on National Legislation; Friends of the Earth U.S.; Grassroots Collaborative; Hedge Clippers; HOPE Fair Housing Center; Housing Action Illinois; Indivisible; Institute for Policy Studies, Global Economy Project; International Brotherhood of Teamsters; International Federation of Professional & Technical Engineers (IFPTE, AFL-CIO); International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America (UAW); Main Street Alliance; Media Voices for Children; Miami Valley Fair Housing Center, Inc. in Dayton, Ohio; Missionary Oblates; National Advocacy Center of the Sisters of the Good Shepherd; National Coalition for the Homeless; National Education Association; NETWORK Lobby for Catholic Social Justice; Other98; Our Revolution; Oxfam America; Presbyterian Church (U.S.A.); Public Citizen; Public Justice Center; Responsible Wealth;; SAFER; Service Employees International Union; Sierra Club; Strong Economy for All Coalition; Take on Wall Street; Tax March; The Child Labor Coalition; UNITE HERE; United for a Fair Economy; West Virginia Center on Budget & Policy; Working America; WV Citizen Action Group; Xaverian Brothers

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