Even a tiny levy on each trade of stocks, bonds, and derivatives would deliver a heavy blow to high frequency traders, which make huge profits, but on slim margins per trade. For ordinary investors whose portfolios have low turnover rates, the cost would be negligible — like a tiny insurance fee against future crises.
Since the 2008 financial crisis, support for such proposals has been growing. In 2016, Senator Bernie Sanders (D-Vermont) pushed the issue into the center of the presidential primary debates, making the point that such taxes would both curb dangerous Wall Street speculation and generate significant revenue for important initiatives, like free higher education.
Even though Hillary Clinton never publicly supported the idea, progressive Democrats, along with strong support from labor unions and other movement groups, secured favorable language about it in the 2016 DNC platform.
This week, House and Senate Democrats are injecting fresh energy into these efforts with a new bill that would impose a 0.1% tax on financial market trades. This model has received the largest official revenue estimate of any such Wall Street tax bill to date. According to the Congressional Budget Office, the new bill would generate $777 billion over 10 years.
On the senate side, the bill signals that this is no longer a “Bernie-only” issue. The lead champion is Senator Brian Schatz (D-Hawaii), with Senators Chris Van Hollen, Jeff Merkley, and Kirsten Gillibrand as initial co-sponsors.
And while she’s declined so far to put her name on this bill, senator and presidential contender Kamala Harris (D-CA) expressed support in the last congressional session for a Sanders bill that includes a financial transaction tax. The Vermont senator has not yet reintroduced his model, which would tax some financial instruments at a higher rate and others at a lower rate than the Schatz proposal. His bill has not received an official revenue estimate.
On the House side, long-time supporter Rep. Peter DeFazio (D-OR) is the lead sponsor, with initial endorsements from about a dozen members, including Congressional Progressive Caucus co-chairs Rep. Pramila Jayapal (D-WA) and Mark Pocan (D-WI) and Rep. Alexandria Ocasio-Cortez (D-NY).
In a rational political world, Congress would’ve adopted this type of tax immediately after the 2008 crash, while the wounds of a financial system run amok were fresher and deeper than today. But in the current moment of surging support for taxing the wealthy, this sensible Wall Street tax may have a good shot. Scalpers may still cheat us out of the chance to see our favorite musicians, but they would no longer have the power they wield today to rig our financial system.
Note: This post was updated at 11:30 am on March 5 to reflect Senator Gillibrand joining as an initial cosponsor of the just-introduced bill.