The Occupy Wall Street protest movement, which has filled streets and parks in New York, Los Angeles, Hong Kong and other cities for weeks, may soon show up in the halls of power, too.
Some time after the Senate comes back into session this week, look for Sen. Tom Harkin, D-Iowa, to introduce a bill that would impose a tax on financial transactions. The size of the levy hasn't been determined, according to an aide to Mr. Harkin who wasn't authorized to speak on the record.
At a Capitol Hill meeting Oct. 21, several groups promoting such a tax said that its size would be minuscule, likely somewhere between 0.1% and 0.01%, or even less.
$90 BILLION
Supporters said that the tax on purchases of stocks, options, derivatives and other financial instruments potentially could raise $90 billion annually at a time when Washington is desperately looking for ways to reduce the deficit and lower individual tax rates.
“This is an absolutely essential step to address the 99% problem,” said Damon Silvers, director of policy at the AFL-CIO, referring to the Occupy Wall Street claim that the movement represents the 99% of Americans whose economic prospects are limited by the 1% who control much of the nation's wealth.
“The financial sector in the United States and worldwide is profoundly undertaxed,” he said. “Inherently, any tax on the financial system is a progressive tax.”
No one is predicting that a financial transactions tax will become a reality before 2013. The Obama administration doesn't support it, and Republicans are adamant in opposing tax increases.
For now, supporters are introducing the idea on Capitol Hill and laying the groundwork to win a future debate.
Mr. Silvers and his allies are taking heart in what they see as a global movement toward a financial transactions tax. They point to a proposal introduced by the European Commission on Sept. 28 that would impose a tax of 10 cents in every $100 of securities sales and 10 cents per $1,000 of derivatives transactions.
It isn't clear how many European Union countries will endorse the plan. The estimated $70 billion that would be raised annually would be used to finance development projects, supporters said.
In the United States, Wall Street already is pushing back against the notion of a financial transactions tax, saying that it would be hard to collect, reduce liquidity, increase costs for investors and make capital more expensive.
But proponents are ready to respond.
BRITAIN'S TAX
Such a tax is being successfully collected in Britain and would have little effect on market liquidity or growth, said Dean Baker, co-director of the Center for Economic and Policy Research.
Little or none of the cost would be passed along to investors holding stocks and other investments for the long term, he said.
Instead, it would be borne by companies engaging in high-frequency trading.
“We'll have less resources going into trading, which is what we want,” Mr. Baker said. “It's going to ... eliminate some of the pointless trading.”
The role that a financial transactions tax could play in shifting the Wall Street mindset from short-term profits to long-term growth is one of the levy's strongest selling points, according to John Fullerton, a former managing director at JPMorgan Chase & Co., and the founder and president of the Capital Institute.
Any effort to move away from short-term thinking to longer time horizons should be welcomed by corporate leaders and make the financial transactions tax more than just a “99%” issue,” he said.
“The fact that Fortune 500 executives aren't coming out in favor of this is the problem,” Mr. Fullerton said.
Although it is a long way from being approved, a financial transactions tax could quickly change Washington accounting ledgers. Budget deficits have focused recent debate on words such as “trillions.”
The tax would introduce terms such as “one-tenth of 1%.”
“We're talking about something so small, no one can understand it,” Mr. Baker said.
Email Mark Schoeff Jr. at [email protected]
