"Democratic Rep. DeFazio: Financial Transactions Tax ‘Would Be Beneficial’ For American Economy"
WASHINGTON, D.C. — A tax on high-frequency financial transactions would be good for American markets and the economy despite what its naysayers claim, Rep. Peter DeFazio (D-OR) said yesterday at the Take Back The American Dream Conference. DeFazio, who along with Sen. Tom Harkin (D-IA) introduced legislation that would institute a financial transactions tax, told ThinkProgress that such a tax could drastically combat the deficit and bolster the overall economy, but Wall Street influence has stifled any hopes of enacting the measure:
DEFAZIO: So it would dampen some of the volatility of Wall Street, it would drive some of these hedge fund speculators out of the market, so therefore it would benefit all investors. It would give us a longer term financial term horizon in this country, and it would raise about $35 billion a year, which we could invest in putting people back to work, or we could use in the future to defray our deficit. In one way or another it would be beneficial. [...]
These people are getting filthy rich by driving up the price of commodities, creating volatility, and they don’t want to see that go away. They don’t care what happens to the rest of the economy. They don’t care how they affect the real economy. They don’t care if they drive up the price of oil. They’re just there to trade something 1,000 times a minute with super-computers. [...]
Point-zero-three percent. We had a tax of 0.4 — that is more than 10 times larger — during the Great Depression to help rebuild the real economy. And for 50 years we had a tax that was about seven times larger than this when the country was seeing the greatest growth in its history, post-World War II. So we’ve proven this will not have a detrimental impact on growth. In fact, it perhaps is beneficial to growth. It’s not necessarily beneficial to salaries of hedge fund managers on Wall Street.
To put things in perspective, Americans paid an average combined sales tax of 9.64 percent in 2010. DeFazio’s proposal of a .03 percent rate is 321 times smaller than what Americans would pay when they buy toothpaste. What’s more, the FTT would raise tens of billions of dollars a year, combat risky market speculation, and increase productive investments. By reducing high-frequency trading, the tax would reduce the market volatility and sudden crashes that come with trading for trading’s sake.
Since the global financial crisis, countries like France and Germany have pushed to institute a financial transactions tax. In America, however, this isn’t the first time that Wall Street has attempted to squash measures specifically geared toward preventing another financial crisis. The financial industry lobbied heavily against the Dodd-Frank financial reform law, and it has continued to lobby heavily against the Volcker Rule, a provision meant to prevent banks from participating in risky trading with federally backed funds.