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Washington lawmakers are watching the Financial Transaction Tax (FTT) debate in Europe as Democrat party leaders have made enacting this kind of tax a central part of their economic proposals for 2015. The effects of this debate could reach across international money markets into the pockets of common American taxpayers.
A FTT is a monetary transactions tax usually associated with the financial sector as compared to consumption taxes that consumers pay on products and services. Democrat Congressman Keith Ellison of Minnesota has introduced an even more specific “Inclusive Prosperity Act” which would tax the sale of stocks, bonds and derivatives. It is part of the on-going party theme of supporting “Main Street over Wall Street.” He claims the tax would reduce market speculation, discourage high-volume and high-speed trading, and slow down the proliferation of complex derivatives.
Republican FTT opponents argue these kinds of taxes would do little to harm Wall Street, even admitting they would raise badly needed revenue, but disagree about where the money would come from. They claim FTTs would put financial stress on working Americans by increasing the costs of having individual, family and employee retirement accounts. This would occur at a time when retirement plans operated by corporations are disappearing and Americans are already struggling with costs, both in time and money, associated with managing their own IRAs. They say the new taxes would make it more difficult for common people to save and invest.
Financial transaction taxes in general are usually proposed at very small percentage rates, but they could affect all transactions, of which there may be dozens (or even hundreds depending upon the size and scope) per account every day. Proponents believe the taxes would raise billions of dollars in new revenues. While experts predict the debate will not lead to a specific action this year, the issue will remain on the burner ready to heat up in time for the 2016 Presidential race.
Worldwide, there are several types of financial transaction taxes being implemented by various organizations and regions. Some are domestic meaning they are imposed only within one nation or financial region. Others are multinational, and affect transactions made between countries. Nearly 50 nations have some form of FTT today.
EU finance ministers have been fiercely debating the scope of the tax pushing for a wide tax base with low tax rates. They have made a public commitment to start a EU FTT on January 1, 2016 with what’s called an “extra-territorial” reach across markets and nations. Yet, the last meeting of the 28 Member States in February ended with little progress on key issues and they are not set to negotiate again until May. Still to be worked out; who will collect the tax, the penalty for non-payment and who will be responsible for paying the penalty.
