12.3.2009 U.S. Representative Peter DeFazio (D-OR), Chairman of the House Subcommittee on Highways and Transit, was joined by 22 of his House colleagues in introducing new legislation that assesses a miniscule tax on Wall Street securities transactions. The money it generates will be used to rebuild Main Street. The legislation, Let Wall Street Pay for the Restoration of Main Street Act, H.R. 4191, has powerful support from economists, Wall Street investors, labor organizations, and consumer groups.
The legislation assesses a small securities transaction tax on Wall Street. A securities transaction tax is applied to:
- Stock transactions (tax rate will be one-quarter of 1 percent (0.25%));
- Futures contracts to buy or sell a specified commodity of standardized quality at a certain date in the future, at a market determined price (tax rate will be 0.02%);
- Swaps between two firms on certain benefits of one party’s financial instrument for those of the other party’s financial instrument (tax rate will be 0.02%);
- Credit default swaps where a contract is swapped through a series of payments in exchange for a payoff if a credit instrument (typically a bond or loan) goes into default (fails to pay) (tax rate will be 0.02%); and
- Options (at the rate of the underlying asset).
The tax could raise approximately $150 billion a year. To ensure that the tax is appropriately targeted to speculators and has no impact on the average investor and pension funds, the tax will be refunded for tax-favored retirement accounts, mutual funds, education savings accounts, health savings accounts, and the first $100,000 of transactions annually that are not already exempted.
Half the revenue generated by this transaction tax (approximately $75 billion) would be deposited in a Job Creation Reserve to fund the creation of good-paying jobs and put Americans back to work rebuilding our nation’s infrastructure. Each $1 billion of Federal infrastructure investment creates or sustains more than 34,000 American jobs and $6.2 billion in economic activity. The Surface Transportation Authorization Act of 2009, which would create or sustain more than 12.5 million family wage jobs, would be partially funded through this tax. The second half of the revenue generated by this transaction tax (approximately $75 billion) would be used to directly reduce the deficit.