Michael Bloomberg just proposed a tax on all financial transactions — and Wall Street is yawning.
The former New York mayor said he would work with Congress to impose a 0.1-percent tax on all financial transactions, including stock and bond trades and payments on derivative contracts, as part of a plan to reduce wealth inequality across the US.
Nevertheless, the policy, also known as an FTT, is unlikely to come to fruition even if Democrats take Congress this year, according to Isaac Boltansky, Washington policy strategist for Compass Point Research & Trading.
“The FTT concept has become a political pot of gold that candidates can use to pay for student debt cancellation or health care while on the campaign trail, but we struggle to see the rhetoric turning into reality given a combination of political and practical considerations,” Boltansky wrote in a Tuesday note.
That’s because Wall Street is likely to lobby hard against the tax with Democratic and Republican lawmakers alike, casting it as a hit to the middle class. The US Chamber of Commerce has argued the measure would slash returns on retirement investments and drive up the cost of home mortgages.
“He’s trying to look tough here, but all of the Democrats are doing the transaction tax thing,” said one hedge fund manager. “At least Mike knows it’s not going anywhere.”
“It’s nonstarter. It’s never going to happen,” said one trader at a large bank. “So who cares?”
Bloomberg’s support for such a tax — which some Democrats have pushed for years to no avail — comes as he surges in the polls and clashes with Democratic frontrunner Bernie Sanders, who has slammed the former New York City mayor as an out-of-touch billionaire.
Bloomberg’s tax would be phased in starting at just 0.02 percent “to monitor and minimize any unintended consequences,” says the nine-page plan, which notes that similar taxes already exist in financial centers such as the UK and Hong Kong. One in the US could raise as much as roughly $50 billion a year, according to a 2015 Tax Policy Center report cited by Bloomberg’s plan.
Bloomberg’s proposal echoes one from Massachusetts Sen. Elizabeth Warren, who has called for a 0.1 percent tax to help fund her universal health care plan. Sanders took a different approach in legislation introduced last year that would create a 0.5 percent tax rate for stock transactions, 0.1 percent for bonds and 0.005 percent for derivatives.
Former vice president Joe Biden and former South Bend, Indiana mayor Pete Buttigieg have also expressed support for a financial transaction tax but have not offered detailed proposals.
The tax is one part of Bloomberg’s plan to toughen restrictions on the financial industry that he says President Trump has undone to the detriment of working people. The plan depends in part on restoring and expanding Obama-era regulations that the Trump administration has rolled back or weakened, such as the Volcker rule limiting speculative investments by banks.
Bloomberg also backed new policies to limit “harmful” kinds of trading, including a speed limit for trading and a ban on payments for priority access to customer orders.
“President Obama made important progress strengthening our financial system and protecting consumers — but President Trump has spent the last three years gutting those safeguards, while giving a huge tax cut to the wealthiest people,” Bloomberg said in a statement.
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