Wall Street 'Transaction Tax' Would Raise $150 Billion Per Year

Posted Dec 17th 2009 6:30PM by Joseph Lazzaro
Filed under: Politics

As in previous attempts, a possible federal transaction tax faces an uphill battle in Congress, and that's probably just as well.

U.S. Rep. Peter DeFazio, D-Oregon, and U.S. Sen. Tom Harkin, D-Iowa, have proposed a transaction fee for all financial transactions: one-quarter of one percent (0.025%) for stock transactions; and a two-one hundredths of one percent (0.02%) levy on standardized commodity futures contracts.

However, the first $100,000 in trades and tax-preferred retirement accounts, such as IRAs and 401(k)s, would be exempt.

The lawmakers estimate that the transaction tax would raise $150 billion per year.

Fiscal/Economic Analysis: Of the two, the financial transaction tax or the possible value added tax, I don't know which one I like least. Thankfully, neither is likely to pass. Each would hurt U.S. GDP growth in an economic recovery that's just beginning to crawl.

Concerning budget deficit reduction, the most feasible plan remains: 1) health care reform, 2) let the 2001 Bush income tax cuts expire, 3) an income tax surcharge on incomes over $250,000 for individuals/$500,000 for families, 4) raising the Social Security benefit age by 3 years, gradually, and 5) assuming health care reform -- a 1% across-the-board program cut (excluding Social Security) annually for 10 years or until the federal budget is balanced.

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Financial Editor Joseph Lazzaro is writing a book on the U.S. presidency and U.S. economy.

Tags: budget deficit, financial transaction tax, taxes

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Reader Comments (Page 1 of 1)

12-17-2009 @ 8:23PM

ftf said...

The $150 billion number is only to draw attention to themselves. The entire securities industry in the best years averages around $20B, and the $150B can be many times the entire annual personal US savings rate. The tax revenue would be net negative anyway, with hundreds of thousands of jobs lost, negative economic growth. The paltry exemptions would be temporary, the 0.25% tax would increase to 2.0% in no time. Bid-ask spreads and broker fees from the remaining brokers still in business would cost multiples more than the tax. Retirement funds would be decimated. Volumes could be written about how destructive this tax would be. Crazy.

12-17-2009 @ 9:03PM

Craig Thomson said...

There are petitions against this proposal which have been organized through www.rallycongress.com. With assistance from people at Elite Trader and elsewhere, we expect a new petition to be organized within a couple weeks.

The most recent petition was started by Robert Green, CPA at www.greencompany.com A new petition should be forthcoming very soon so please share and disseminate with all interested parties. Meanwhile, the link to the petition from last month is attached as follows.

http://www.rallycongress.com/greentradertax-traders-association1/2644/save-traders-jobs-do-not-enact-financial-transaction-tax/

12-18-2009 @ 6:26AM

al coholic said...

I would be in favor of a special tax on high frequency trading which has distorted the market by accounting for about 60% of all volume and gives the big boys like Sachs an unfair advantage.