Senate Version of Wall Street Transportation Tax Coming Next Week

Rep. Pete DeFazio (D-OR) and Ed Perlmutter (D-CO) have officially unveiled their new bill taxing Wall Street transactions to pay for the next long-term transportation bill and other infrastructure needs, and Sen. Tom Harkin (D-IA) is poised to introduce the legislation next week in the upper chamber of Congress.

tom_harkin_gi_jpg___cnn.jpgSens. Tom Harkin (D-IA) and Bernie Sanders (I-VT) are set to propose a transactions tax bill. (Photo: One Penny Sheet)

DeFazio and Perlmutter’s measure, which attracted 23 House Democratic co-sponsors, is notably broader than a similar proposal released in August.

The earlier bill limited its transaction tax to trades of oil futures and options on those futures. This week’s version would levy a 0.25 percent tax on all stock trades in addition to a 0.02 percent tax on futures, swaps, and credit default swaps — the financial contracts notoriously embraced by AIG before its collapse.*

Half of the proceeds from DeFazio and Perlmutter’s transaction tax would be used to reduce the federal deficit, with the other half used for a "Job Creation Reserve Fund" to increase available funding for the House’s six-year federal transport bill.

A statement from Perlmutter’s office projected that the legislation would generate "approximately $55 billion" in funding for the bill introduced by House transportation committee chairman Jim Oberstar (D-MN). Meanwhile, Oberstar has estimated a $140 billion gap between available six-year gas tax revenues and his $500 billion legislation.

Financial industry lobbyists are already mobilizing against the concept of a transactions tax, but the new bill’s sponsors note that the U.S. government taxed stock transfers successfully between 1914 and 1966 — Congress even raised the tax to help close budget shortfalls during the Great Depression.

DeFazio said earlier this month that White House economic advisers are critical of the transactions tax plan, but Politico reported today that House Speaker Nancy Pelosi (D-CA) is seeking Obama administration support for internationally imposing such fees.

As those talks move forward, a Senate version of the Wall Street transportation tax bill would give the proposal further momentum. Still, many moving pieces are involved in the capital’s intensifying debate over how to boost job creation through infrastructure spending, and it remains to be seen whether new revenue sources will translate into merit-based or "fix-it-first" funding of transportation projects.

(*Note: The bill aims to exempt middle-class payers by refunding the transaction tax for trades made by mutual funds, education savings accounts, health savings accounts, and retirement accounts.)

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  • Galls

    What does a tax on market liquidity have to do with transportation?

    The obvious solution is to get rid of all, taxes, cease subsidies to those socialist transportation modes and fund interstate travel entirely off of user fees.

    Would make rail a lot more competitive and growth a lot smarter wouldn’t it?

  • FTF

    Studies of the real world applications of financial transaction taxes show that the tax will produce net negative revenue, net negative jobs, and reverse economic growth. So then, why do the proponents lie about the benefits and what is this tax really about? What do stocks and their derivatives and the exchanges and my retirement have to do with transportation and why am I being punished? This transaction tax is purely middle class wealth destruction. If anyone knows anything at all about the markets: The proposed tax exemptions will mean nothing. The tax itself is small in comparison to the increased costs that it will cause. Nearly all market making activity will stop. The bid-ask spread will definitely widen from one cent back to over fifty cents because of reduced liquidity. That would be a 2% loss on a $25 stock on each purchase or sale. Brokers will fail and fees will increase. The long-term investor can expect to lose several percent per year and not realize one half of their retirement yield over a lifetime because of severely reduced compounding.

  • Fed-Up


    How many bills with a punitive, highly destructive tax against the financial sector of this country does this incompetent Congressman have to introduce? Every one of his bills has been either defeated or not even brought to a vote by his own Congressional brethren. The Treasury Secretary emphatically says that such a tax is unworkable. Yet Defazio continues to try to introduce this tax, every year since 2001 with a pretext that ANYONE who would trade a stock for their personal gain or for their savings plan is evil. What has this politician done for his constituents or the country he represents?

    In the past year, he wanted a Make Wall Street Pay for Wall Street Bailout bill, but the banks who borrowed money to avoid economic collapse have been repaying these loans with interest, thus earning money for the American tax-payer. OK, that failed, let’s try a tax derivatives after the run-up i oil, but that went no where. This fall he introduces a Let Wall Street Pay For Main Street Restoration bill, which languishes in the House. And now we have Make Wall Street Pay for Transportation funds bill. Does anyone see a pattern here?

    And news flash – Wall Street pays significant tax revenue to the government, bothe on a corporate level and on the salaries of the hundreds of thousands of individuals either directly employed by these Wall Street firms or firms who would do business with these financial firms. The US Gov’t is ALREADY paid significant tax revenue, and yet people like DeFazio, who obviously display a personal VENDETTA against the financial firms in this country would tax punitively these firms because, why, he does not like them? Mr Congressman, read your constitution – such punitive taxation is known as a Bill of Attainder. You would think someone we elect to represent us should know this.

  • bryanc

    this proposed bill is as sick as they come. a pure attack on capitalism and a road to socialism. this country was founded on opportunities and specualation to acheive success. this bill squashes all the hopes and dreams of middle america and how to invest their money to achieve success over the long term. quick example put away 5k in a roth ira for 40 years 200k capital contribution 6-8% annual returns equals 1,500,000 at retirement. now add in this tax which should amount to a compound negative of about 2% for the life of the retirement comes out to about 900,000. more than a half a million dollars the avg taxpayer would payout through the life of the retirement for a transaction tax. absolutley criminal and no person of sound mind would want this.

  • Bob

    To the Congressmen who propose this tax:

    Are you aware that by trying to curtail active trading while promoting long-term investing with this new tax you are actually decreasing the tax revenue received by the Treasury? A buy and hold investor pays taxes on his/her profits when they sell their holdings and are taxed at the capital gains level, currently 15%. A short term trader does not get this treatment and his taxes are calculated as income, with rates as high as 35% (soon to raise to 39.6%). So who pays more? The buy and hold guy at 15% or the active trader at 39.6%?

    Peronally, if I were a smart Congressman looking to increase revenue for the FEderal government then I would look at the behavior which would tax at higher rates than lower rates.

    This tax is just a punitive measure RE-introduced by the Congresman from Oregon against an industry HE is appalled by. This is punitive and petty and beneath that of an official we elected to represent us and our needs, noit his own biases.

  • Nels

    If this tax is enacted, volume will drop to where they were decades ago. This will cause bid/ask spreads to jump. This will mean that anybody with a 401k account, IRA account or any type of equity account will be charged higher fees.

    Why does Harkin want to enact yet another tax on the middle class, which is what this is?

    By the way, Sweden tried it and had to abandon it after just 7 years when they found that volume move to foreign countries. The same thing would happen here.

    Finally, what planet is Harkin from where he thinks that Wall Street won’t pass along these to the middle class and the little guy?


    This tax will ultimately hit small retail investors. Big banks have many avenues/countries to tarder from. Such a broad tax targetting everyone is unfair and rather sounds that the main purpose of the bill is to reduce capital market activity in this country – sort of ideological opposition of Capitalism itself. Very unfair and Unamerican.


Pelosi: Passing a Wall Street Transport Tax Would Require Overseas Buy-in

Any proposal to fund new U.S. infrastructure investment by taxing financial transactions — such as Rep. Pete DeFazio’s (D-OR) bill taxing Wall Street oil speculators — would require international participation to prevent the trades in question from migrating overseas, House Speaker Nancy Pelosi (D-CA) said today. House Speaker Nancy Pelosi (Photo: MoniqueMonicat) As House Democrats […]