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Published: February 2010

Congress should reign in reckless financial markets gambling

Coalition: Financial Reform

Consumer Action sent a letter to Senator Harkin and Representative DeFazio expressing support for their bills that would attempt to curb financial markets speculation.

Below is the full text of the letter:

We, the undersigned organizations, are writing in support of your bills, “The Wall Street Fair Share Act”(S. 2927) and “Let Wall Street Pay for the Restoration of Main Street Act of 2009” (H.R. 4191). Your bills would rein in reckless financial markets gambling, and help prevent another economic crises by placing modest taxes on financial speculation.

Your bills would also put Wall Street to work for the public good by placing a small securities transaction tax on trades of stocks, options and swaps. A tax on these trades has little impact on the average investor or pension fund because they hold their investments for the long-term, but it does curb risky financial behavior and high-volume short-term speculative trading. By exempting individual retirement accounts, tax-benefited mutual funds, pension funds, and the first $100,000 of stock purchases per year, your bills effectively exempt middle class investors.

At a time when funds are urgently needed to address the employment crisis and budget deficits at home, as well as other urgent needs such as poverty and climate crises around the globe, this bill would provide an important, reliable revenue stream. A modest tax of 0.25 percent would raise $75 billion a year. The cost of financial trading has dropped dramatically over the last three decades as a result of computerization, which has led to an explosion in trading volume and a redistribution of resources to Wall Street. The taxes proposed in your bills would raise trading costs only back to the levels in the 1980s, a period with vibrant and well-developed capital markets.

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 0.2 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 simply 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. Moreover, every major European leader is now calling for this type of tax to be applied globally, and the United States is the major roadblock to this plan.

“The Wall Street Fair Share Act” and “Let Wall Street Pay for the Restoration of Main Street Act of 2009” are important steps in the direction of economic fairness and balance for these reasons, we fully endorse both bills.

Lead Organization

Americans for Financial Reform

Other Organizations

Americans for Financial Reform | California Reinvestment Coalition | Center for American Progress | Center for Responsible Lending | Community Legal Services of Philadelphia | Consumer Federation of America | Greenlining Coalition | Leadership Conference on Civil and Human Rights | National Association of Consumer Bankruptcy Attorneys | National Coalition for Asian Pacific American Community Development (CAPACD) | National Community Reinvestment Coalition | National Consumer Law Center (on behalf of its low income clients) | National Council of La Raza | National Fair Housing Alliance | National Urban League Policy Institute | Philadelphia Unemployment Project | PICO National Network | Service Employees International Union

More Information

S. 2927 and H.R. 4191

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