(Bloomberg News) Two U.S. lawmakers outlined a proposal to tax U.S. financial transactions at a rate of 0.03 percent and urged the congressional deficit-reduction panel to include the idea in their final proposal.
Senator Tom Harkin of Iowa and Representative Peter DeFazio of Oregon said today they will introduce the companion bills, which would apply the tax to stocks, bonds and all derivatives contracts. The measures exempt initial issuance and debt with an original term of less than 100 days and would take effect on Jan. 1, 2013.
"There's no question that Wall Street can easily bear this modest tax," Harkin said at a press conference in Washington.
The lawmakers are introducing their measures after the European Union proposed a similar 0.1 percent tax on trading of stocks and bonds throughout the 27-nation bloc. Harkin and DeFazio also introduced transaction tax measures during the past two years; those measures were not considered by either chamber.
Harkin said he would send a letter to the Joint Select Committee on Deficit Reduction, the so-called supercommittee, recommending it consider the transaction tax in its final product. That panel, created by Congress as part of the August deal to prevent a U.S. default, is tasked with finding $1.5 trillion in reductions to the federal deficit by Nov. 23.
Trade groups representing the largest U.S. banks and trading firms oppose the bills, including the Securities Industry and Financial Markets Association, which counts Goldman Sachs Group Inc. and JPMorgan Chase & Co. among its members.
"It's important to be clear about the economic and financial impact of such a tax not just on markets, but on investors," Kenneth E. Bentsen Jr., Sifma's executive vice president for public policy and advocacy, said today in statement. "A financial-transaction tax is essentially a sales tax on investors."
The lawmakers said one of the goals of the proposal was to drive out some high frequency trading from the market.
"We have to begin to rebuild the real economy and it starts with getting rid of the most egregious, unproductive and volatile of these super high-volume, quantitatively driven traders," DeFazio said.