WASHINGTON — In an effort to curb speculation in financial markets and increase government revenue, a group of House and Senate Democrats on Wednesday introduced legislation that would tax certain financial transactions.
The proposal is modeled on a similar effort in the European Union. It calls under certain circumstances for a tax of $3 for every $10,000 traded in stocks, bonds and other debt, and derivatives. Trades by consumers would be excluded, as would the initial issuance of the financial instrument.
"This legislation will curb unnecessary speculation and generate needed revenue to help our cash-strapped federal government pay down debt and invest in the real economy to benefit all Americans," bill sponsor Rep. Peter DeFazio, D-Ore., said in a press release.
The legislation's chances of passage seem dim, at least right now. The House version of the bill is being co-sponsored by 11 Democrats, but it seems unlikely to garner support from the Republicans who control the chamber. The Obama administration has not embraced the idea, either.
The legislation's backers argue that the tax rate is set low enough that it would not likely impact decisions about whether to embark on productive economic activity, but that it would discourage short-term trading on Wall Street. They point out that the tax rate for financial transactions under consideration by the EU is more than three times higher.
"This trading tax would help raise necessary funds to invest in our infrastructure and the education of our children, among other priorities, and would do so without hurting job creation," Sen. Tom Harkin, D-Iowa, said in a press release. There is no question that Wall Street can easily bear this modest tax."
But opponents of a tax on financial transactions, including financial industry groups, argue that it would harm investors, businesses, and the broader economy.
Under the proposal, the tax would take effect on Jan. 1, 2013. The legislation's sponsors did not release an estimate of the amount of revenue it would generate.
