A senior House Democrat, Rep. Chris Van Hollen (D-Md.), moved today to put the idea of a Wall Street transaction tax firmly on the table of the national policy debate. Rep. Van Hollen’s proposal – along with a swift statement of support from House Minority Leader Nancy Pelosi (D-Calif.) – is excellent news.
A Wall Street transaction tax makes compelling sense on three levels:
- First, it will help ensure that the financial industry bears its fair share of the tax burden. While U.S. banks and financial companies reap more than a quarter of the nation’s corporate profits, they pay only about 18 percent of corporate taxes and contribute less than 2 percent of total tax revenues, according to the Bureau of Economic Analysis and the International Monetary Fund.
- Second, it moves the financial system in a safer direction, and one more focused on serving real economic needs. It does so by reducing churning and speculation, including high-frequency trading that generates dangerous volatility and creates continual opportunities for insiders to profit at the expense of average investors and market integrity.
- And third, it’s a way to raise significant revenue to fund important public priorities. The transaction tax proposed by Rep. Van Hollen – is similar to one that 11 European nations already have in the works. It would be almost imperceptible to ordinary investors, but would nevertheless raise tens of billions of dollars a year.
AFR also strongly supports a second element of Rep. Van Hollen’s plan, which would sharply limit the tax deductability of corporate pay above $1 million, carrying out the intent of legislation originally enacted by Congress in 1993.