http://www.reuters.com/article/ousivMolt/idUSTRE5AH5CN20091118
US financial trade tax faces uphill battle
Wed Nov 18, 2009 4:19pm EST
By Kim Dixon and Andy Sullivan - Analysis
WASHINGTON (Reuters) - Proposed taxes on financial transactions face an uphill battle in the United States with powerful interests opposed and a lack of support among some key U.S. lawmakers.
Proposals in the U.S. House of Representatives that would impose a 0.25 percent tax on over-the-counter derivatives transactions and stock trades are among ideas being mulled by top lawmakers.
But support is lackluster among tax-writing legislators and the idea is likely to hit a roadblock in the Senate, where consensus is harder to achieve.
"It comes up because it looks like a money machine ... it's a very tiny tax on a lot of transactions and seems painless," said Clint Stretch, managing principal for tax policy at Deloitte, and former counsel for the joint congressional tax committee. "If you are a mutual fund manager, in and out of the market all the time, those little pieces of pennies would accumulate."
One proposal could raise $150 billion a year.
Lobbyists for securities firms, brokers and banks are all watching the debate but believe it ultimately will fail.
In addition, U.S. Treasury Secretary Timothy Geithner has been skeptical of the idea.
"The Obama administration clearly does not support a daily transaction tax," Anne Mathias, an analyst in Washington at Concept Capital, told clients in a note. "We cannot completely dismiss the slight possibility it could be part of a House jobs bill in the next month or so, but we think even if it cleared the House it would have virtually no chance in the Senate."
Several Democratic leadership aides said it was premature to say whether a transaction tax, which is also being pushed by unions, would be included in the final package, since it is one of many items under consideration.
PROPOSALS
Representative John Larson, the No. 4 Democrat in the House, has proposed a 0.25 percent tax on over-the-counter derivatives transactions, but his measure has drawn no co-sponsors since it was introduced in July.
Representatives Peter DeFazio and Ed Perlmutter are floating a bill that would tax stock trades at 0.25 percent, options at the rate of the underlying asset, and futures transactions, swaps and credit default swaps at 0.02 percent. It would exempt the first $100,000 of trades each year.
The $150 billion raised per year would go to reducing the deficit and job-creating measures like road construction, the lawmakers said in a letter to colleagues.
They have spoken with House leaders and aim to introduce the bill in coming weeks, aides said.
US financial trade tax faces uphill battle
Wed Nov 18, 2009 4:19pm EST
By Kim Dixon and Andy Sullivan - Analysis
WASHINGTON (Reuters) - Proposed taxes on financial transactions face an uphill battle in the United States with powerful interests opposed and a lack of support among some key U.S. lawmakers.
Proposals in the U.S. House of Representatives that would impose a 0.25 percent tax on over-the-counter derivatives transactions and stock trades are among ideas being mulled by top lawmakers.
But support is lackluster among tax-writing legislators and the idea is likely to hit a roadblock in the Senate, where consensus is harder to achieve.
"It comes up because it looks like a money machine ... it's a very tiny tax on a lot of transactions and seems painless," said Clint Stretch, managing principal for tax policy at Deloitte, and former counsel for the joint congressional tax committee. "If you are a mutual fund manager, in and out of the market all the time, those little pieces of pennies would accumulate."
One proposal could raise $150 billion a year.
Lobbyists for securities firms, brokers and banks are all watching the debate but believe it ultimately will fail.
In addition, U.S. Treasury Secretary Timothy Geithner has been skeptical of the idea.
"The Obama administration clearly does not support a daily transaction tax," Anne Mathias, an analyst in Washington at Concept Capital, told clients in a note. "We cannot completely dismiss the slight possibility it could be part of a House jobs bill in the next month or so, but we think even if it cleared the House it would have virtually no chance in the Senate."
Several Democratic leadership aides said it was premature to say whether a transaction tax, which is also being pushed by unions, would be included in the final package, since it is one of many items under consideration.
PROPOSALS
Representative John Larson, the No. 4 Democrat in the House, has proposed a 0.25 percent tax on over-the-counter derivatives transactions, but his measure has drawn no co-sponsors since it was introduced in July.
Representatives Peter DeFazio and Ed Perlmutter are floating a bill that would tax stock trades at 0.25 percent, options at the rate of the underlying asset, and futures transactions, swaps and credit default swaps at 0.02 percent. It would exempt the first $100,000 of trades each year.
The $150 billion raised per year would go to reducing the deficit and job-creating measures like road construction, the lawmakers said in a letter to colleagues.
They have spoken with House leaders and aim to introduce the bill in coming weeks, aides said.
