Legislation Introduced to Tax Wall Street, Address Economic Inequality
Sen. Brian Schatz, Rep. Peter DeFazio (D-Ore.), and Sen. Chris Van Hollen (D-Md.) introduced legislation on Tuesday, March 5, 2019, to create a new progressive tax on financial transactions that would generate billions in revenue, while addressing economic inequality and reducing high risk and volatility in the market.
“Over the last decade, Wall Street has made record profits from high-risk trades that have made the market dangerously volatile, while doing nothing to add real value to our economy or raise wages for workers,” said Sen. Schatz. “My bill will help discourage this kind of risky, volume-based trading and bring in billions in new revenue.”
“Risky financial behaviors like near-instantaneous high-volume trades have destabilized our financial markets while contributing nothing to the economy,” said Rep. DeFazio. “Congress needs to rein in excessive speculative activity and protect working families from these dangerous practices while maintaining appropriate market liquidity. This legislation will curb unnecessary speculation and generate much-needed revenue to help the federal government fund national priorities and invest in the real economy to benefit all Americans.”
“Wall Street has made an art of high-speed trading and rank speculation that has fattened the wallets of a few while putting everyday Americans at risk,” Sen. Van Hollen said. “This tiny high-roller fee will help curb this risky behavior while generating revenue that we can invest in growing our real economy and helping hard-working families.”
The Wall Street Tax Act addresses the disconnect between the financial system and the real economy by reducing unproductive and speculative trading. By increasing transaction costs slightly, the bill will help redirect investment that has flooded into transactions without economic value into more productive areas of the economy. It will also reduce the risk of financial crashes and limit the risks that high-speed arbitrage pose to our financial system.
“Volatile, high-volume trading is great for Wall Street traders who can make millions off of fluctuations,” said Sen. Merkley. “But it does nothing to help middle-class families or to invest in jobs and innovation. This legislation restores balance to our markets while raising revenue for key priorities that help working families.”
“More than a decade after Wall Street greed brought the American economy to its knees, big banks and the richest Americans are doing just fine, yet Main Streets and hardworking New Yorkers all over our state are still struggling,” said Sen. Gillibrand. “Congress needs to do everything it can to prevent another financial crisis, and this bill would update the rules for Wall Street, help prevent systemic risk in our financial system, and raise revenue so we can invest in our economy. I am proud to support this legislation, and I urge my colleagues to stand with workers and fight with me to pass it.”
The wealthiest 10% of Americans own an estimated 85% of stock market wealth. The bipartisan Tax Policy Center estimates that a tax of this kind would only apply to the highest earners in the country, with almost half of those affected belonging to the wealthiest 1%.
The Wall Street Tax Act would tax the sale of stocks, bonds, and derivatives at 0.1% (10 basis points), and would raise an estimated $777 billion over a decade. A stock trade of $1,000 would incur a tax of just one dollar. The tax would apply to the fair market value of equities and bonds, and the payment flows under derivatives contracts. Initial public offerings and short-term debt (with a maturity of less than 100 days) would be exempted.
In addition to Schatz and Van Hollen, the legislation is cosponsored by U.S. Sens. Jeff Merkley (D-Ore.) and Kirsten Gillibrand (D-N.Y.) in the Senate.
In the House of Representatives, the Schatz-DeFazio bill is cosponsored by Reps. Rosa DeLauro (D-Conn.), Raul Grijalva (D-Ariz.), Pramila Jayapal (D-Wash.), Ro Khanna (D-Calif.), Grace Napolitano (D-Calif.), Alexandria Ocasio-Cortez (D-N.Y.), Chellie Pingree (D-Maine), Mark Pocan (D-Wis.), Jan Schakowsky (D-Ill.) and Peter Welch (D-Vt.).
“‘Bad’ taxes distort the economy and increase societal inequities. Good taxes can simultaneously raise revenues because they promote growth and equity,” said Joseph Stiglitz, a Nobel Prize-winning economist and former chief economist for the World Bank. “The Wall Street Tax Act is an example of the latter, a good tax that encourages the economy to move away from wasteful, excessive, short-term financial transactions toward more productive activities that enhance the well-being of our entire economy.”
The Wall Street Tax Act is supported by a number of organizations, including the Action Center on Race and the Economy, AFL-CIO, American Family Voices, American Federation of State, County and Municipal Employees (AFSCME), American Federation of Teachers (AFT), Americans for Democratic Action (ADA), Americans for Financial Reform, Americans for Tax Fairness, Asset Building Strategies, Campaign for America’s Future, Center for Popular Democracy Action, Coalition on Human Needs, Communications Workers of America, Consumer Action, CREDO, Demos, Economic Policy Center, Friends of the Earth U.S., Grassroots Collaborative, Hedge Clippers, HOPE Fair Housing Center, Indivisible, Institute for Policy Studies, Global Economy Project, International Federation of Professional & Technical Engineers (IFPTE, AFL-CIO), International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America, UAW, Main Street Alliance, Media Voices for Children, National Education Association (NEA), NETWORK Lobby for Catholic Social Justice, Oxfam, Public Citizen, Public Justice Center, RootsAction.org, SAFER, Strong Economy for All Coalition, Take on Wall Street, The Child Labor Coalition, Tax March, UNITE HERE and Working America.