Ocasio-Cortez signs on to Democrat's tax bill targeting stock trades
House Democrats, along with co-sponsor New York Democrat Alexandria Ocasio-Cortez, introduced a tax bill targeting financial transactions on Wall Street.
Dubbed the “Wall Street Tax Act of 2019,” the legislation would impose a tax on the purchase of most securities – including stocks and bonds – and on transactions involving derivatives. The tax would be about 0.1 percent of the value of the security or 0.1 percent of all payments made under the terms of a derivative contract.
The measure’s main sponsor is Oregon Rep. Peter DeFazio. Ocasio-Cortez’s involvement with the legislation was confirmed by FOX Business on Tuesday.
The bill aims to curb short-term speculative activity among high-frequency traders, which can have destabilizing effects on the market. In May 2010, for example, a so-called “flash crash”— said to be partially caused by selling among high-frequency traders – wiped out billions of dollars from stocks before prices recovered not long after.
According to estimates provided by the Joint Committee on Taxation (JCT), the measure would increase revenues by about $777 billion between 2019 and 2028.
On the downside, the JCT notes the bill could discourage all forms of short-term trading – including activity that helps stabilize prices and asset values. Further, liquidity could be reduced and the effectiveness with which prices reflect real information reduced. The tax could also result in a decline in investment, a reduction in asset prices and, consequently, a decline in household wealth and consumption, JCT warned.
“What you’re seeing here with this proposal to impose a new tax on financial transactions is exactly in step with the Democrats’ new lurch toward socialism,” Kentucky Republican Rep. Andy Barr told Maria Bartiromo on FOX Business Tuesday morning. “You can’t have capitalism without capital, and this is a direct punishment of capital formation.”
Hawaii Democrat Sen. Brian Schatz confirmed that he planned to introduce a similar proposal in the Senate, citing the need to discourage “risky, volume-based trading.”
“Wall Street has made record profits from high-risk trades that have made the market dangerously volatile, while doing nothing to add real value to our economy or raise wages for workers,” Schatz said in a February Facebook post.
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Many Democrats – including several declared 2020 presidential contenders – have announced fresh tax proposals targeting the wealthy or high earners. Independent Vermont Sen. Bernie Sanders, for example, recently unveiled a measure to expand the estate tax to rates as high as 77 percent. Massachusetts Sen. Elizabeth Warren proposed a new wealth tax on the nation’s highest earners, while Ocasio-Cortez floated raising income tax rates to as high as 70 percent.