Democratic Rep. Peter Defazio is once again putting forth a bill that would establish a financial transaction tax (FTT).
Defazio tried unsuccessfully to establish this tax with a Democratic coalition in Congress in 2013 and again in 2015. The bill is making a resurgence this year because the Democratic Party platform has taken up Defazio’s cause in hopes of limiting speculation and high-volume trading.
Defazio says the bill would bring in $417 billion dollars in tax revenue over the next 10 years, reports The Hill. He is expected to announce the bill at a Wednesday press conference where he will be joined by members of the AFL-CIO, Americans for Financial Reform, and the Center for Economic and Policy Research.
Wall Street is actively fighting against this bill, saying that it would weaken financial markets and hurt small investors, specifically Americans saving for retirement. Most Americans retirement accounts are comprised of mutual funds which are traded frequently to maximize returns on investment. A tax on every trade, even at .03%, would mean cumulative losses on many Americans retirement accounts, and appears as if Congress is creating a perverse incentive for Americans to save for their future.
The Investment Company Institute (ICI) has said that, “an FTT tax is a terrible idea…It would harm all investors, especially middle-income American workers saving for retirement.” Corroborating the ICI’s statement, the Modern Markets Initiative CEO, Bill Harts, has said that an FTT could hurt America’s competitive advantage. Many foreign companies list their stocks on the U.S. exchanges which brings foreign money into the U.S. investment marketplace.
Harts added that “Since [high-frequency trading] has gained prominence over the past 20 years, our industry has focused on lowering investor costs. We measure costs like spreads in fractions of a cent, and that focus has led to the best markets ever from the investor’s standpoint, and a competitive advantage for our country. We are mystified as to why any politician would want to give away that advantage.”
The battle between government and big business will continue in the comings weeks, but for now it looks like it will end in a stalemate.
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