Financial Speculation Tax (FST)
The financial collapse of 2008 and resulting economic crisis in the United States was primarily brought about due to risky behavior and the development of ever more convoluted financial instruments and transactions by those on Wall Street. The resulting economic downturn in the United States has also led to the need for new forms of revenue that can help fund much needed federal investments in infrastructure, education and job creation in order to help turn our country around and put it on a more secure fiscal foundation.
CWA believes that a way to help stem the potential for a future repeat of the 2008 financial collapse and provide needed federal revenue is through passage of a Financial Speculation Tax (FST). A Financial Speculation Tax (FST) is a small percentage-tax placed on financial transactions such as stocks, bonds, debt obligations, and derivatives. CWA urges Members of Congress to support legislation by Senator Tom Harkin (S. 1787) and Representative Peter DeFazio (HR 3313) – the Wall Street Trading and Speculators Tax Act, which proposes a 0.03% tax on stock, bond and derivative trades.
· An FST would put Wall Street to work for Main Street. Reckless Wall Street gambling cost Americans trillions in bailouts, lost jobs and wealth, and cost states billions in lost revenue. The FST would help put Wall Street to work rebuilding Main Street with revenue to create jobs and support critical public services.
· An FST would NOT touch regular bank transactions, but instead place fees only on Wall Street trades. There is a myth circulating on the internet that confuses the FST bills with Rep. Fattah’s Debt Free America Act, an entirely different proposal that would apply a 1% fee on retail and wholesale transactions in order to eliminate the national debt and phase out the income tax.
· An FST would raise at least tens of billions of dollars per year in badly needed revenue. This is a substantial amount, skimming the fat off of a sector of the economy that can afford to pay it.
· An FST would reduce dangerous financial market speculation. Since the tax would hit high-volume, high-speed trading the hardest, it would serve to discourage short-term speculation in financial markets as well as the proliferation of ever more complex derivatives. More complex financial instruments could be subject to the tax many times over, substantially reducing the potential profits from such complexity.
· An FST would encourage longer-term productive investment. By reducing the volume and profitability of short-term trading that serves no productive purpose, the tax would encourage Wall Street to find new ways to make money off of longer-term productive investments.
· The FST is not a new idea. From 1914 to 1966, the U.S. levied a 0.02% tax on all sales or transfers of stock. In 1932, Congress more than doubled the tax to help financial recovery and job creation during the Great Depression. Transactions taxes were imposed in most financial markets until the last two decades, and there still is a 0.5% tax imposed on each trade on the London Stock Exchange. At least 29 countries, including Australia, Hong Kong, Switzerland and the U.K., currently have some form of FST.
· A tax of a fraction of a percent would make little difference to a person who intends to hold onto stocks as a long-term investment. If, for example, the FST were set at 1/10 of a percent, it would cost a trader buying $100,000 of stock only $100 when they purchase their shares. Also, research shows that most investors will respond to a tax by reducing the frequency of their trades. This means that by trading less often, they will end up spending roughly the same total amount on their trades.
· An FST would not force trading to move overseas.The U.K. has had a tax on stock trades for decades, and the U.K.’s volume of trading has grown robustly. The revenue it raises each year (about 3 billion pounds) would be the equivalent of $30 billion in an economy the size of the U.S. economy. This real-world example indicates that a unilateral financial speculation tax would be both successful and enforceable.
Current House Cosponsors 1/24/12
Rep Blumenauer, Earl [OR-3] - 11/2/2011 Rep Braley, Bruce L. [IA-1] - 11/2/2011 Rep Capuano, Michael E. [MA-8] - 1/13/2012 Rep Conyers, John, Jr. [MI-14] - 11/2/2011 Rep Edwards, Donna F. [MD-4] - 11/2/2011 Rep Filner, Bob [CA-51] - 11/2/2011 Rep Grijalva, Raul M. [AZ-7] - 12/2/2011 Rep Hinchey, Maurice D. [NY-22] - 11/2/2011 Rep Hirono, Mazie K. [HI-2] - 11/2/2011 Rep Jackson, Jesse L., Jr. [IL-2] - 1/13/2012 Rep Johnson, Henry C. "Hank," Jr. [GA-4] - 11/2/2011 Rep McGovern, James P. [MA-3] - 12/13/2011 Rep Michaud, Michael H. [ME-2] - 12/13/2011 Rep Norton, Eleanor Holmes [DC] - 11/18/2011 Rep Reyes, Silvestre [TX-16] - 12/13/2011 Rep Sarbanes, John P. [MD-3] - 11/2/2011 Rep Scott, Robert C. "Bobby" [VA-3] - 11/4/2011 Rep Slaughter, Louise McIntosh [NY-28] - 11/2/2011 Rep Stark, Fortney Pete [CA-13] - 11/4/2011 Rep Sutton, Betty [OH-13] - 11/2/2011 Rep Welch, Peter [VT] - 11/2/2011
Current Senate Cosponsors 1/24/12
Sen Brown, Sherrod [OH] - 11/2/2011 Sen Sanders, Bernard [VT] - 11/2/2011
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