Two U.S. lawmakers will introduce measures to impose a transaction tax on financial firms that resembles a proposal released by the European Union.
Senator Tom Harkin, an Iowa Democrat, and Representative Peter DeFazio, an Oregon Democrat, will introduce the bills tomorrow in their respective chambers. The bills will give the United States an increased role in the international debate over a transaction tax, which is likely to be discussed at the Group of 20 summit this week in Cannes, France.
“It’s a significant way to raise some needed revenue,” Harkin said in an interview today in Washington. “Quite frankly, I bet nobody would even feel it.”
The European Union in September proposed a financial transaction tax that would take effect in 2014 and raise about $57 billion euros ($78 billion) a year. Germany and France have led a push for global implementation.
The bills are unlikely to become law: Republicans, who have opposed financial-transaction taxes in the past, control a majority in the House. President Barack Obama’s administration has also voiced concerns over the proposal and declined to give a direct endorsement in advance of the G-20 summit that opens Nov. 3.
U.S. exchange operators fell the most since August on the news that the lawmakers would propose the tax.
NYSE Euronext declined 6.8 percent, the most since Aug. 18, to $24.76, while Nasdaq OMX Group Inc. fell 2.8 percent to $24.36. CME Group Inc. slumped 8.6 percent to $251.88 in the biggest retreat since Aug. 10.
Harkin and DeFazio introduced similar proposals in recent years that fell short; the lawmakers expressed hope that the European proposals may increase support in the U.S. Congress.
Harkin and DeFazio are proposing a lower rate for the United States. While the EU proposal would apply a tax of 0.1 percent on trades of stocks and bonds, the U.S. tax would be “about three basis points” or 0.03 percent, Harkin said.
“We’re simplifying it, looking at a lower rate and actually substantially mirroring the proposal in Europe,” DeFazio said in an interview.
Obama administration officials support efforts to assess fees on financial firms that pose a risk to the larger economy; however, they oppose levying fees on ordinary investors.
“We’re very much synched up with the goal of assuring that the largest financial institutions” bear the burden for risky investments, Lael Brainard, the Treasury undersecretary for international affairs, told reporters yesterday. The Obama administration has proposed a “financial crisis responsibility fee” to be paid by the largest banks, not retail investors.
Bank trade groups like the Financial Services Forum and Securities Industry and Financial Markets association have opposed transaction tax proposals in the past. In September, they joined with five other business trade groups to send a letter to Treasury Secretary Timothy F. Geithner opposing the idea, which was gathering support in Europe.
“The G-20 members have committed to work together to support policies that will lead to strong, sustainable and balanced growth,” the trade groups, which included the U.S. Chamber of Commerce and the Business Roundtable, wrote in the Sept. 22 letter. “The imposition of a financial transaction tax would run counter to achieving these objectives.”
The European Commission, the EU’s executive arm, will discuss its proposals for a transaction tax at this week’s summit in France, EU officials said last week. There is not yet strong support for a global tax, so next week’s discussions will serve as a way to keep the topic in focus for future years, the officials said.
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