President Obama’s Deficit Commission Should Consider Speculation Tax


Re: Support for a financial stability and revenue raising measure

November 24, 2010

Dear Members of the National Commission on Fiscal Responsibility and Reform,

Americans for Financial Reform (“AFR”) is a coalition of  more than 250 national, state and local groups who have come together to advocate for a financial system that will play a more constructive role in providing capital for homeownership, communities, and businesses, and  avoid a repeat of the excessive risk taking, devastating instability and massive taxpayer bailouts of recent years.

Our goal of stabilizing our financial system and your goal of balancing the budget are indelibly linked. The latter cannot possibly be achieved without the former. The financial crisis of 2008, caused in large part by reckless Wall Street gambling, has cost our economy some $14 trillion  in lost savings and wealth.  America cannot afford a repeat of this crisis.

We believe that a small tax on financial speculation would bring a large measure of stability to the financial system while at the same time being an important revenue raiser for our financial recovery. We write to you today to recommend that the Commission undertake serious consideration of this revenue raising mechanism.

Taming Volatility

High-volume, high-speed financial trading played a major role in turning the collapse of the U.S. housing bubble into a global economic catastrophe.  While the Dodd-Frank bill will bring a welcome measure of transparency to the shadow markets financial incentives for reckless speculation persist. In addition to the well-publicized flash crash of May 2010, on a smaller scale fifteen U.S. companies have had their trading halted after inexplicable and disastrous swings in their price since June, according to Bloomberg data. In September, the share price of an utility in North Carolina plunged almost 90 percent. In a matter of seconds, a large, productive company with 3.1 million customers and 11,000 employees had all but vanished on the nation’s stock market, and executives had no idea why.

Even a small financial speculation tax would discourage speculators and high-speed traders, increasing stability in the marketplace.

It would also produce significant revenue. A modest tax of 0.25 percent on the trade of stocks, options and swaps would provide a permanent reliable revenue stream of approximately $100 billion a year, or $1 trillion over ten years. We support the proposals introduced in the House and the Senate by Representative Peter DeFazio and Senator Tom Harkin (HR 4191 and S 2927) that would designate such a tax for job creation and deficit reduction. These bills would exempt middle class investment vehicles and the first $100,000 a year in investment income.

Not a New Idea

The idea of a transaction tax is not a new one. The United States had a transfer tax from 1914 to 1966 which levied a 0.20 percent tax on all sales or transfers of stock. In 1932, Congress more than doubled the tax to help financial recovery and job creation during the Great Depression.

Critics charge that if the United States reapplies this tax domestically it would push trading overseas. This claim is demonstrably false as the United Kingdom currently levies a similar tax and has the highest volume exchange in Europe. Major European leaders, including German Chancellor Angela Merkel and French President Nicolas Sarkozy, are supportive of a transaction tax. The International Monetary Fund is also supportive of taxing the financial sector and recently declared a financial transaction tax a feasible policy option that is unlikely to force trading overseas since it is common in so many countries in one form or the other.

We ask you to seriously consider a financial transaction tax, a measure, which would both increase financial stability, and thus the long term health of the whole economy, and produce revenue without imposing costs on working and middle class families.


Americans for Financial Reform

Following are the partners of Americans for Financial Reform.

All the organizations support the overall principles of AFR and are working for an accountable, fair and secure financial system. Not all of these organizations work on all of the issues covered by the coalition or have signed on to every statement.

A New Way Forward
Alliance For Justice
Americans for Democratic Action, Inc
American Income Life Insurance
Americans for Fairness in Lending
Americans United for Change
Calvert Asset Management Company, Inc.
Campaign for America.s Future
Campaign Money
Center for Digital Democracy
Center for Economic and Policy Research
Center for Economic Progress
Center for Media and Democracy
Center for Responsible Lending
Center for Justice and Democracy
Center of Concern
Change to Win
Clean Yield Asset Management
Coastal Enterprises Inc.
Color of Change
Common Cause
Communications Workers of America
Community Development Transportation Lending Services
Consumer Action
Consumer Association Council
Consumers for Auto Safety and Reliability
Consumer Federation of America
Consumer Watchdog
Consumers Union
Corporation for Enterprise Development
CREDO Mobile
CTW Investment Group
Economic Policy Institute
Essential Action
Greenlining Institute
Good Business International
HNMA Funding Company
Home Actions
Housing Counseling Services
Information Press
Institute for Global Communications
Institute for Policy Studies: Global Economy Project
International Brotherhood of Teamsters
Institute of Women.s Policy Research
Krull & Company
Laborers. International Union of North America
Lake Research Partners
Lawyers’ Committee for Civil Rights Under Law
Leadership Conference on Civil Rights
Move On
National Association of Consumer Advocates
National Association of Neighborhoods
National Community Reinvestment Coalition
National Consumer Law Center (on behalf of its low-income clients)
National Consumers League
National Council of La Raza
National Fair Housing Alliance
National Federation of Community Development Credit Unions
National Housing Trust
National Housing Trust Community Development Fund
National NeighborWorks Association
National Training and Information Center/National People.s Action
National Council of Women.s Organizations
Next Step
OMB Watch
Opportunity Finance Network
Partners for the Common Good
Progress Now Action
Progressive States Network
Poverty and Race Research Action Council
Public Citizen
Sargent Shriver Center on Poverty Law
State Voices
Taxpayer.s for Common Sense
The Association for Housing and Neighborhood Development
The Fuel Savers Club
The Seminal
U.S. Public Interest Research Group
United Food and Commercial Workers
United States Student Association
Veris Wealth Partners
Western States Center
We the People Now
Woodstock Institute
World Privacy Forum
Union Plus
Unitarian Universalist for a Just Economic Community

Partial list of State and Local Signers

Alaska PIRG
Arizona PIRG
Arizona Advocacy Network
Arizonans For Responsible Lending
Association for Neighborhood and Housing Development NY
Audubon Partnership for Economic Development LDC, New York NY
BAC Funding Consortium Inc., Miami FL
Beech Capital Venture Corporation, Philadelphia PA
California PIRG
California Reinvestment Coalition
Century Housing Corporation, Culver City CA
Chautauqua Home Rehabilitation and Improvement Corporation (NY)
Chicago Community Loan Fund, Chicago IL
Chicago Community Ventures, Chicago IL
Chicago Consumer Coalition
Citizen Potawatomi CDC, Shawnee OK
Colorado PIRG
Coalition on Homeless Housing in Ohio
Community Capital Fund, Bridgeport CT
Community Capital of Maryland, Baltimore MD
Community Development Financial Institution of the Tohono O’odham Nation, Sells AZ
Community Redevelopment Loan and Investment Fund, Atlanta GA
Community Reinvestment Association of North Carolina
Community Resource Group, Fayetteville A
Connecticut PIRG
Consumer Assistance Council
Cooper Square Committee (NYC)
Cooperative Fund of New England, Wilmington NC
Corporacion de Desarrollo Economico de Ceiba, Ceiba PR
Delta Foundation, Inc, Greenville MS
Economic Opportunity Fund (EOF), Philadelphia PA
Empire Justice Center NY
Enterprises, Inc., Berea KY
Fair Housing Contact Service OH
Federation of Appalachian Housing
Fitness and Praise Youth Development, Inc., Baton Rouge LA
Florida Consumer Action Network
Florida PIRG
Funding Partners for Housing Solutions, Ft. Collins CO
Georgia PIRG
Grow Iowa Foundation, Greenfield IA
Homewise, Inc., Santa Fe NM
Idaho Nevada CDFI, Pocatello ID
Idaho Chapter, National Association of Social Workers
Illinois PIRG
Impact Capital, Seattle WA
Indiana PIRG
Iowa Citizens for Community Improvement
JobStart Chautauqua, Inc., Mayville NY
La Casa Federal Credit Union, Newark NJ
Low Income Investment Fund, San Francisco CA
Long Island Housing Services NY
MaineStream Finance, Bangor ME
Maryland PIRG
Massachusetts Consumers’ Coalition
Massachusetts Fair Housing Center
Michigan PIRG
Midland Community Development Corporation, Midland TX
Midwest Minnesota Community Development Corporation, Detroit Lakes MN
Mile High Community Loan Fund, Denver CO
Missouri PIRG
Mortgage Recovery Service Center of L.A.
Montana Community Development Corporation, Missoula MT
Montana PIRG
Neighborhood Economic Development Advocacy Project
New Hampshire PIRG
New Jersey Community Capital, Trenton NJ
New Jersey Citizen Action
New Jersey PIRG
New Mexico PIRG
New York PIRG
New York City Aids Housing Network
NOAH Community Development Fund, Inc., Boston MA
Nonprofit Finance Fund, New York NY
Nonprofits Assistance Fund, Minneapolis M
North Carolina PIRG
Northside Community Development Fund, Pittsburgh PA
Ohio Capital Corporation for Housing, Columbus OH
Oregon State PIRG
Our Oregon
Piedmont Housing Alliance, Charlottesville VA
Michigan PIRG
Rocky Mountain Peace and Justice Center, CO
Rhode Island PIRG
Rural Community Assistance Corporation, West Sacramento CA
Rural Organizing Project OR
San Francisco Municipal Transportation Authority
Seattle Economic Development Fund
Community Capital Development
The Fair Housing Council of Central New York
The Loan Fund, Albuquerque NM
Third Reconstruction Institute NC
Vermont PIRG
Village Capital Corporation, Cleveland OH
Virginia Citizens Consumer Council
Virginia Poverty Law Center
War on Poverty – Florida
Westchester Residential Opportunities Inc.
Wigamig Owners Loan Fund, Inc., Lac du Flambeau WI