Oregon Congressman Peter DeFazio and Iowa Sen. Tom Harkin introduced legislation Nov. 3 to place a tax on certain trading activities undertaken by banking and financial firms.
Dubbed the “Robin Hood Tax,” the measure — formally known as Wall Street Trading and Speculators Tax Act — would raise more than $350 billion between Jan. 2013 and 2021, according to an analysis released by the Congressional Joint Committee on Taxation.
According to its sponsors, both Democrats, the bill would not harm long-term investing like retirement funds, but instead target financial trading and complex transactions undertaken by financial and investment firms.
The measure will place a tax of three basis points (3 pennies on $100 in value) on most non-consumer financial trading including stocks, bonds, and other debts, except for their initial issuance. For example, if a company receives a loan from a financial company, that transaction would not be taxed. But, if the financial institution traded the debt, the trade would be subject to the tax. The tax would also cover all derivative contracts, options, puts, forward contracts, swaps and other complex instruments at their actual cost. The measure excludes debt that has an original term of less than 100 days.
“This legislation will generate $350 billion in needed revenue for our cash-strapped federal government by targeting speculators flipping stocks a thousand times a minute,” DeFazio said. “We need serious proposals to get our country back on sound fiscal footing. $350 billion in new revenue will reduce our deficit and enable federal investments in our future.”
At the recent G-20 summit of the world’s biggest economies, many leaders endorsed a larger financial speculation tax proposed by the European Commission. The European Union is considering a tax rate that is more than three times higher.
AFL-CIO President Richard Trumka, who was in Cannes, France, for the G-20 meeting and who met with many of the nations’ leaders, praised Harkin and DeFazio for introducing their bill, but said the AFL-CIO supports a larger tax rate on financial speculation.
“In order to maximize revenue and minimize opportunities for tax arbitrage, Congress should pass a U.S. financial speculation tax in line with what has been proposed in Europe,” Trumka said.
U.S. Rep. Earl Blumenauer (D-OR) is among 11 representatives and two U.S. senators to co-sponsor the Wall Street Trading and Speculators Tax Act.
The proposed tax, if passed by Congress, would take effect on Jan. 1, 2013.
