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AFR Letter: Support Financial Transaction Tax

Submitted by on October 21, 2011 – 9:36 am

Read our letter supporting a financial transaction tax here, or below.

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October 21, 2011

Representative Jeb Hensarling

129 Cannon House Office Building

Washington DC 20515

 

Senator Patty Murray

448 Russell Senate Office Building

Washington DC 20515

 

Re: Financial Speculation Tax

Dear Senator Murray and Representative Hensarling:

We are writing to you today to urge the Joint Select Committee on Deficit Reduction to examine a small levy on financial speculation as a revenue-raising measure.

The deficit problem that the Select Committee must address was to a significant degree created by the world financial crisis, a crisis caused by Wall Street speculation. It is therefore appropriate that we call on Wall Street to help address it. A small tax on financial market transactions has the potential to raise significant revenue and simultaneously limit reckless short-term speculation that can threaten financial stability.

The idea of a small fee on the sale of financial instruments like securities and derivatives is not a new one. Such taxes have a long track record both in the United States and globally. The United States had a transfer tax from 1914 to 1966, which levied a small fee on all sales or transfers of stock. The UK levies a transaction tax of one half-percentage point on stock transfers and has done so for many decades. Asian countries such as Hong Kong, Taiwan, South Korea, and India also currently levy securities transaction taxes. The European Union is currently proposing a tax of one-tenth of one percent on the trading of shares and bonds, as well as a smaller tax on derivatives transactions. The French and German governments have already endorsed this idea.

There is no question that even an extremely low fee on the vast market in financial transactions would generate significant revenue. The value of the U.S. market in stocks and bonds alone exceeds $40 trillion, and the notional value of derivatives transactions is several times that. The IMF cites estimates that a miniscule tax of one cent per $100 of financial transactions globally would raise over $200 billion each year. The European Union’s proposed financial transaction tax is forecast to raise almost $70 billion annually. In the United States, economists at the University of Massachusetts and theCenter for Economic and Policy Research have estimated that one U.S. financial transaction tax proposal would raise $176 billion a year. Even a smaller tax could easily raise tens of billions per year.

 

Beyond the revenues to be raised, even a small financial transactions tax would have the salutary effect of discouraging the kind of high frequency trading that has increased harmful volatility in financial markets and was responsible for the “flash crash” last year. High frequency traders sometimes hold stocks for only fractions of a second and do not generally contribute to the capital markets’ purpose of long-term price discovery. A financial transaction tax could create economic benefits by channeling resources away from such unproductive short-term speculation and toward more useful purposes.

Numerous bills have been introduced in Congress utilizing a financial transaction tax mechanism.  In the 111th Congress these included S. 2927 (Harkin) and HR 4191 (DeFazio), while in the current Congress they include HR 870 (Conyers), HR 755 (Stark), and HR 2003 (DeFazio).

Over 1,000 economists recently signed an open letter advocating a financial speculation tax “technically feasible” and “morally right.”  They join a long list of historically prominent economists — including Nobel prize winners like James Tobin and Joseph Stiglitz — who have endorsed the idea of a transaction tax as a valuable tool to discourage high-volume speculative trading that serves no useful social purpose.

Critics charge that if the United States reapplies this tax domestically it would push trading overseas. This claim is demonstrably false as countries like the United Kingdom and Hong Kong levy small transaction taxes while remaining world financial centers. This claim also ignores the international movement toward the use of transaction taxes, as shown by the European Union’s transaction tax proposal. Respected institutions like the International Monetary Fund and the Gates Foundation have concluded that it is administratively feasible to levy a small financial transaction tax in a single jurisdiction.

Today, three years after the financial meltdown and a taxpayer bailout, Wall Street is booming with record profits and bonuses being reported. At the same time folks on Main Street are still suffering with zero new job growth and rising poverty. It is both fair and practical to call on Wall Street to do more to aid the recovery.

Sincerely,

AFL-CIO

AFSCME                    

Alliance for a Just Society

Alliance for Retired Americans 

Americans for Democratic Action

Americans for Financial Reform            

Arizona Interfaith Alliance for Worker Justice    

Arkansas Interfaith Committee for Worker Justice         

Building and Construction Trades Dep’t., AFL-CIO        

Campaign for America’s Future             

Campaign for Community change          

Center for Biological Diversity  

Center for Media and Democracy         

Chicago Political Economy Group          

Citizen Action of New York      

Citizen Action of Wisconsin      

Citizen Action/Illinois    

CLUE-LA (Clergy and Laity United for Economic Justice)         

Communications Workers of America (CWA)   

Community Organizations in Action       

Community Reinvestment Association of North Carolina

Community Voices Heard

Connecticut Citizen Action Group          

Consumer Action         

Consumer Watchdog    

Courage Campaign       

CtW Investment Group

Demos

Essential Information    

Florida Consumer Action Network        

Foreclosurehamlet.org  

Friends of the Earth US            

Georgia Rural Urban Summit    

Good Old Lower East Side (GOALS)    

Grass Roots Organizing (Missouri)        

Greater New York Labor-Religion Coalition       

Health Alliance International     

Health GAP     

Illinois People’s Action

Institute for Agriculture and Trade Policy (IATP)           

Institute for Policy Studies, Global Economy Project       

Interfaith Worker Justice          

Interfaith Worker Justice Committee of Colorado           

International Forum on Globalization      

Iowa Citizen Action Network    

Iowa Citizens for Community Improvement        

Its Our Economy          

Jobs with Justice          

Keystone Progress       

Koreatown Immigrant Workers Alliance            

KyotoUSA       

Lakeview Action Coalition        

Liberty Tree foundation            

Main Street Alliance                 

Maine People’s Alliance            

Maryknoll Office for Global Concerns   

Michigan Citizen Action            

Michigan Organizing Project     

Missouri Progressive Vote Coalition      

MoveOn.org Political Action

National Alliance of Latin American and Caribbean Communities (NALACC)     

National Council of Women’s Organizations

National Education Association 

National Employment Law Project

National Nurses Union

National Organization of Women (NOW)          

National People’s Action          

National Priorities Project         

National Women’s Law Center

NEDAP          

NETWORK, A National Catholic Social Justice Lobby   

New Bottom Line Campaign     

New Hampshire Citizens Alliance for Action     

New Jersey Citizen Action        

New New Deal Project

NH Citizen Alliance      

NJ Citizen Action         

Ocean State Action      

OMB Watch    

Oregon Action

Pennsylvania Association of Staff Nurses and Allied Partners (PASNAP)           

Penn Action     

PICO National Network           

Progressive Democrats of America  (PDA)       

Progressive Maryland   

ProgressOhio   

Public Citizen   

Rebuild the American Dream    

Responsible Wealth      

SEIU   

SOUL

Sugar Law Center for Economic and Social Justice        

Sunflower Community Action    

Syracuse United Neighbors       

TakeAction Minnesota  

Tax Justice Network USA        

Tennessee Citizen Action          

The Chicago Political Economy Group

The International Brotherhood of Teamsters      

U.S. PIRG       

United for a Fair Economy (UFE)         

United Action for Idaho            

USAction         

Virginia Organizing       

Voices of Community Activists and Leaders (VOCAL-NY)

Washington CAN         

Washington Community Action Network           

West Virginia Citizen Action Group

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