As I noted in this article, the idea of a financial transaction tax (FTT; sometimes called a Robin Hood tax) doesn’t seem to be going away, even though it generates plenty of controversy in both the U.S and around the world.
Last month, the European Commission lent its support to plans from 11 member countries to implement a financial transaction tax, even though not all EU members are in favor of such a tax. In a release, the Commission noted, “Through the FTT, the financial sector will properly participate in the cost of rebuilding Europe’s economies and bolstering public finances.” Among those planning to push ahead are France, Germany and Italy.
This development prompted several organizations from within the U.S. financial industry to make their case against a national, regional, or global FTT in a letter sent last week to Tim Geithner, Treasury Secretary. “Such a levy would contribute to economic uncertainty and distort the ability of investors and businesses to make long-term economic decisions,” the letter said. It was signed by the Financial Services Roundtable, the Investment Company Institute, the U.S. Chamber of Commerce and the Securities Industry and Financial Markets Association.
To be sure, if history is any indication, the likelihood of a financial transaction tax being implemented in the U.S. isn’t strong. GovTrack gives a bill introduced in September by Rep. Keith Ellison (D-MN), along with 15 co-sponsors, the “Inclusive Prosperity Act” (H.R. 6411), just a 2% chance of enactment. That’s largely because Ellison is a member of the minority party. The bill would impose a tax on some security trading transactions.
About a year ago, Senator Tom Harkin (D-IA), along with several co-sponsors, introduced the Wall Street Trading and Speculators Tax Act (S.1787), which also would have imposed a 0.03% excise tax on some securities transactions. According to Peter DeFazio, a co-sponsor, an analysis from the Joint Committee on Taxation found that the bill would have raised $352 billion between January 2013 through 2021. The bill hasn’t made it out of committee.
The “Let Wall Street Pay for the Restoration of Main Street Act of 2009” (H.R. 4191) also would have imposed a tax on some securities transactions. Introduced by Representative Peter DeFazio (D-OR), the bill amassed 31 co-sponsors, but died in committee, also according to GovTrack.
Even so, support for a financial transaction tax can be found within the U.S. In September, more than 60 organizations sent a letter to U.S. Secretary of State Hilary Clinton, which read, in part, “We firmly believe it is past time for the financial sector to pay its fair share of taxes, and for the government of the United States to support this modest imposition on financiers and multinational corporations in order to meet the needs of ordinary people. At a time when public funds are deemed scarce, a Robin Hood Tax would create a new source of revenue to pay for desperately needed public goods.” The letter was prompted by misinformation about such a tax that allegedly was spread by a member of the State Department. Among the signatories to the letter: the Holy Cross International Justice Office, the National Organization for Women and Oxfam America.
Also in September, the editorial board of USA Today expressed its support for a small transaction tax on rapid trades. Their reasoning focused primarily on the dangers of such trades, which they said are “manufacturing risk while siphoning money and talent that growth-producing sectors of the economy need.” A small tax would help return markets to their core purpose of raising capital in pursuit of enterprise, profit and economic growth, the paper said.
Even David Weidner, a columnist with the Wall Street Journal, voiced support for a financial transaction tax earlier this year. While noting that such a tax is a political non-starter, he added, “That is a shame, because a minimal transactions tax would create new forms of revenue for cash-strapped regulators and gently apply the brakes to trading run amok in the markets.”