Friday, February 08, 2013

Praising ECOFIN Approval of Financial Transaction Tax, Senator Harkin Will Reintroduce U.S. Legislation

Praising the recent approval of a financial transaction tax for eleven E.U. countries by the Council of Economic and Finance Ministers, Senator Tom Harkin (D-Iowa) plans to reintroduce in the 113th Congress legislation to impose a financial transaction tax in the U.S. In the 112th Congress, Senator Harkin introduced the Wall Street Trading and Speculators Tax Act, S. 1787, which would have applied a three basis point tax or three cents on every $100 financial transaction. The EU financial transaction tax allows for a ten basis point tax on stock transactions and a one basis point tax for derivatives transactions.  Rep. Peter DeFazio (D-OR) will introduce a companion bill in the House.

Financial Transaction Tax. Under the Harkin legislation, for the tax to apply the purchase of the security must occur on a trading facility located in the U.S. and the purchaser or seller must be a U.S. person. The bill would exempt initial issues of securities and securities traded pursuant to certain lending arrangements. There will also be an exemption for retirement and education savings. The Act broadly defines ``derivative instrument’’ to include any option, forward contract, futures contract or any similar financial instrument.

According to Senator Harkin, the Congressional Joint Tax Committee scored their proposal as raising $352 billion over 10 years in the last Congress.   The lawmakers will reintroduce their measure in the coming weeks.