The Wall Street Sales Tax is a proposal to levy fees on risky financial investments and transactions in order to generate revenue for federal and state government programs. Many economists and labor and consumer groups support the idea of a tax Wall Street Sales Tax, but to date it doesn’t exist in American tax law.
The Wall Street Sales Tax is often described as the Robin Hood Tax because it would primarily affect wealthy investors to the benefit of middle-class Americans. It is also sometimes called the Tobin tax, after the Nobel Prize-winning economist James Tobin. The Wall Street Sales Tax is unrelated to the rumored 1 percent transaction tax on bank deposits and withdrawals.
Why a Wall Street Sales Tax is Popular
Supporters of a Wall Street Sales Tax uniformly believe that Congress, in particular its fiscally conservative members, are too focused on spending cuts to the so-called entitlement programs such as Social Security and Medicare in trying to reduce the nation’s debt. They believe such cuts would be devastating to low-income Americans.
"The current sequestration process is bad enough. The so-called 'Grand Bargain' represented by the recommendations of Simpson, Bowles and others threatens to unleash a death spiral of unemployment and poverty which our nation is not certain to survive," writes the group United Front Against Austerity.
Another supporter of the Wall Street Sales Tax is Dean Baker, co-director of the Center for Economic and Policy Research. “The concept of a transactions tax has received considerable support from grassroots groups around the country. It has also been endorsed by many unions, including the National Nurses United, SEIU, and the AFL-CIO,” Baker wrote.
Examples of Transaction Taxes in Effect
The United Kingdom imposes a 0.5 percent transaction tax on stock trades, a levy it has had in place since 1694. The transaction tax in the United Kingdon raises the equivalent of $30 billion to $40 billion a year.
India and China also have financial transactions taxes.
The United States does impose a fee on the sale of stocks, but it is very small, only $0.004. The revenue funds the Securities and Exchange Commission, which supervises and regulates securities markets and securities professionals.
Legislation Would Create Wall Street Sales Tax
There have several attempts in Congress to create a Wall Street Sales Tax, or transaction tax. None has been successful.
Two of the bills were introduced by Democratic U.S. Sen. Tom Harkin of Iowa and Democratic U.S. Rep. Peter DeFazio of Oregon. Their legislation is called the Let Wall Street Pay for the Restoration of Main Street Act. It would would impose a tax on the trade of stocks, bonds and derivatives of 3 cents for every $100 in value of the transaction. The bipartisan Joint Committee on Taxation estimated their proposal would raise $352 billion over 10 years.
Democratic U.S. Rep. Keith Ellison has also proposed similar legislation that would impose a transaction tax based on the value of the assets being traded. At minimum the tax would be 0.5 percent and raise as much as $180 billion a year.
How Other Wall Street Sales Tax Proposals Would Work
The Wall Street Sales Tax proposed by the United Front Against Austerity would:
- Impose a 1 percent tax on the sale of financial securities such as stocks, bonds, options, futures and derivatives.
- Distribute the revenue equally to the federal and state governments to pay for social programs, public employee salaries, pension funds, and public roads and bridges.
- Exempt "household" investments up to $1 million.
Obama Wall Street Tax Proposal
President Barack Obama has not weighed in publicly on a Wall Street Sales Tax, but is reported to have at one point expressed support for the idea to advisers.