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.
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.)