With only two weeks left to reach a deal, lawmakers supporting the bill that would levy a tax on financial transactions urged the Joint Select Committee on Deficit Reduction in a Nov. 8 letter to adopt their proposal.
In a letter to the deficit panel, lawmakers–led by Sen. Tom Harkin, D-Iowa, and Rep. Peter DeFazio, D-Ore., said that analysis conducted by the Joint Committee on Taxation found that the Wall Street Trading and Speculators Tax Act introduced Nov. 2 would raise $353 billion from January 2013 through 2021.
The Joint Tax Committee also estimated that the Tax Act (S. 1787/H.R. 3313) would raise $218.6 billion in the last five years of that period, on average over $43 billion per year.
“Given the very high volume of financial trading, this tax will ultimately raise over $40 billion a year, badly needed for government services and for reducing deficits,” the lawmakers told the deficit committee.
The deficit reduction committee has less than two weeks to meet their deadline of cutting at least $1.2 trillion from the nation’s deficit. Roll Call reported Nov. 9 that both Republicans and Democrats on the committee have leaked details of their plans.
Democrats, for instance, Roll Call says, would provide a plan that would be worth $2.3 trillion in savings over 10 years, with $1 trillion in revenues, $1 trillion in cuts and $300 billion in interest—a $700 billion reduction overall from the Democrats’ first offer.
Republicans on the Joint Committee on Deficit Reduction leaked their own proposal on Nov. 8, Roll Call said. That plan is worth $1.2 trillion over 10 years and made up of $500 billion in revenues and $700 billion in cuts.
The transaction tax legislation levies a small tax of three basis points (three pennies on $100 in value) on most nonconsumer financial trading, including stocks, bonds, and other debts, except for their initial issuance, the lawmakers explained. For example, “if a company receives a loan from a financial company, that transaction would not be taxed. But, if the financial institution traded the debt, the trade would be subject to the tax,” they said.
The tax would also cover all derivative contracts, options, puts, forward contracts, swaps and other complex instruments at their actual cost. The measure excludes debt that has an original term of less than 100 days. The legislation, the lawmakers said, “does not harm long-term investing like retirement funds, but instead targets financial trading and complex transactions undertaken by financial and investment firms.”
As members of the bipartisan deficit committee work to craft a comprehensive deficit reduction plan by Nov. 23, the lawmakers said that the committee “should incorporate reasonable spending cuts and ask the wealthiest Americans and most profitable corporations to pay their fair share.” Given the “extraordinary profitability of Wall Street banks … there is no question that Wall Street can easily bear this modest tax.”