BILL: Should We Tax Wall Street Speculations? - The Tax on Wall Street Speculation Act of 2023 - H.R.4119

The Bill

H.R.4119 - Tax on Wall Street Speculation Act

Bill Details

• Sponsored by Rep. Barbara Lee (D-Calif.) on June 14, 2023
• Companion legislation sponsored by Sen. Bernie Sanders (I-Vt.) in the Senate
• Committees: House - Ways and Means
• House: Not yet voted
• Senate: Not yet voted
• President: Not yet signed

Bill Overview

• Imposes an excise tax on certain trading transactions to invest in American families and communities, improve infrastructure and environment, expand economic opportunity, and reduce market volatility. The tax will go towards free tuition under Lee and Sanders' co-sponsored free college bill.
• Levies a tax of 0.5% on stock trades, a 0.1% fee on bonds, and a 0.005% fee on derivatives and other financial instruments.
• Provides an income tax credit to offset the financial transaction tax for individuals with incomes less than $50,000 and married couples with incomes less than $75,000. 
• Economic analysis of this proposal has estimated that it would raise $220 billion per year or well over $2 trillion over 10 years.

What's in the Bill

Payback for 2008 bailouts

• Taxpayers provided Wall Street with the largest bailout in history following the 2008 financial crash: $700 billion from the Treasury Department and $16 trillion in total financial assistance from the Federal Reserve.

Promotes financial justice

• Since the 2008 recession, 45% of all new income has gone to the top 1% of earners who disproportionately hold their wealth in stocks, bonds, and derivatives on Wall Street.
• This tax would fall primarily on wealthy high-frequency traders who make up 50-60% of all U.S. market trading.
• Reduces the destabilizing economic risk associated with high-frequency trading.
• Since 1985, Wall Street bonuses have surged by 1,165%.

Acknowledges historical examples

• Dozens of countries have imposed a financial transactions tax, including the U.K., Germany, France, Switzerland, China, India, South Korea, Hong Kong, Singapore, Taiwan, and Brazil.
• The U.S. had a Wall Street speculation tax from 1914 to 1966. In 1914, the tax was 0.02% on sales or transfers of stock. In 1932, Congress more than doubled that tax to help finance the government during the Great Depression. 

What Supporters Are Saying

• Supporters claim the bill would reform the U.S.'s inequitable taxation system and ensure the wealthy pay their fair share to the American people.
• Over 1,000 economists, including Jeffery Sachs and Dean Baker, have endorsed a tax on financial speculation. Over 165 organizations, including Oxfam America, Public Citizen, and the Sierra Club, support the tax.
• Rep. Lee said:

"Since 1985, Wall Street bonuses have surged by 1,165 percent, even as wages have stagnated for most Americans. It is past time for Wall Street to pay society back for the incredible damage it did in 2008—and continues to do—to the middle class of this country. This financial transaction tax is a critical step towards making the wealthy pay their fair share and building a financial system that works for everyone, not just the 1 percent."

• Sen. Sanders said:

"Let us never forget: Back in 2008, middle class taxpayers bailed out Wall Street speculators whose greed, recklessness and illegal behavior caused millions of Americans to lose their jobs, homes, life savings, and ability to send their kids to college. Now that giant financial institutions are back to making record-breaking profits while millions of Americans struggle to pay rent and feed their families, it is Wall Street's turn to rebuild the middle class by paying a modest financial transactions tax." 

What Opponents Are Saying

• According to a Congressional Budget Office (CBO) report from 2011, financial transaction taxes "raise the cost of financing new investment… [and] reduce output and employment."
• John Cochrane, senior fellow at the Hoover Institution at Stanford University, said:

"It'll induce some very clever financial innovation of how to get around it because there's ways to trade without incurring the tax, and, as a result, I don't think it'll gain much revenue."

Tell your reps to support or oppose this bill

-Emma Kansiz

(Photo Credit: Canva)