H.R. 1068 - Let Wall Street Pay for Wall Street's Bailout Act of 2009

The purpose of a Securities Speculation Tax would be to raise the costs of short-term speculative trading with the purpose of discouraging excessive speculation and channeling funds towards productive investment. The tax would be on all financial-market transactions and would be comparable to a sales tax.

Such a tax on financial speculation would also raise a significant amount of revenue for the government. It has been estimated that a set of scaled transactions taxes could generate $150 billion in revenue per year.

The tax would have a negligible impact on long-term investors and people who trade infrequently, specifically middle-class families investing to save for retirement or education expenses. However, the tax would significantly reduce the profit for short-term speculators who buy large blocks of financial products, hold them for a day or a few hours, and then resell them for a small gain.

The tax would help reduce the size of the financial sector by making speculation significantly less profitable.

The tax would be modest:
Economists have proposed financial transaction taxes ranging from 0.25% to 0.5% on the purchase or sale of stocks, and comparable fees on a sliding scale for other assets such as bonds, futures, options, and foreign currency.

The United Kingdom currently has a modest transaction tax of 0.5%.

1. Approximately forty other countries, including the Japan, Germany, Italy, France, China, Brazil, India, South Africa, and Chile currently employ or have used in the past such a tax. 

Proposals for financial transaction taxes have been made or supported by:

1. John Maynard Keynes (1936)
2. Head of the White House National Economic Council, Lawrence Summers (1989)
3. Nobel Prize Winning Economists James Tobin (The Tobin Tax) and Joseph Stiglitz (1989)
4. Economists Robert Pollin and Dean Baker (2002)
5. Economist Dean Baker (2000, 2008)

There is precedent for such a tax in the Unites States:

1. The US had a securities transfer tax from 1914 to 1966. The Revenue act of 1914 levied a 0.2% tax on all sales or transfers of stock. In 1932, Congress more than doubled the tax to help overcome the budgetary challenges during the Great Depression.
2. The US currently employs a very small transaction tax that pays for the operations of the Securities and Exchange Commission; therefore an additional transaction tax is easy to implement and would require little additional administrative apparatus.

Relevant legislation:

1. Congressman Peter DeFazio (D-OR) introduced H.R. 1068 in 2009. This bill, called the "Let Wall Street Pay for Wall Street's Bailout Act of 2009," proposed a securities transfer tax of up to .25 percent on the purchase and sale of financial instruments such as stock, options, and futures.
2. Cosponsors include: Representatives Capuano (MA), DeLauro (CT), Edwards (MD), Stark (CA), Sutton (OH), Welch (VT), and Wu (OR).
3. Status of H.R. 1068: Referred to the House Committee on Ways and Means.