Currency tax: A way to invest in our future (Rep. Pete Stark)

[The Northerner]

By Rep. Pete Stark (D-Calif.) - 07/20/10 03:51 PM ET

Each day, $4 trillion dollars of currency are traded. For international businesses and travelers, trading dollars for other currencies serve a legitimate purpose. However, nearly 80 percent of these transactions are undertaken by a handful of major banks. Experts agree that most of these transactions are made for purely speculative purposes.

Wealthy traders and big financial institutions make huge bets on the fluctuations in currency value, and they can make massive profits if their bets are correct. This type of speculation helped to worsen the recent financial crisis and serves no purpose other than to make a few people and institutions even richer.

Today, I introduced H.R. 5783, the Investing in Our Future Act. My legislation would simply impose a small tax — of 0.005 percent — on these currency transactions. The money raised would be put toward investments in children, global health and climate change mitigation.

For the average person or business, this small tax will hardly be noticed. But, due to the extreme speculation that takes place, it would raise significant funds. Studies estimate a worldwide 0.005 percent tax on dollar transactions would raise $28 billion a year and reduce currency speculation by 14 percent.

Read more: http://thehill.com/blogs/congress-blog/economy-a-budget/109869-currency-tax-a-way-to-invest-in-our-future-rep-stark

[DFW]

1. Sounds nicer than it is

Most of the worldwide currency transactions are conducted outside of the USA, so we wouldn't see much of any such tax.
There is no way we can tax dollars traded outside of the USA, any more than Germany can tax euros traded from an exchange
in New York to an exchange in Philadelphia.

Plus, a huge number of companies that do business internationally need to take currency positions to protect their
position. If they sell in the USA, then they sell dollars short to lock in a rate in their own currency, so as not
to lose money when the dollars come in. If the dollar goes the wrong way, and they sell a lot of dollars after a fall
in the value of the dollar against their own currency, then they can end up losing money and having to fire workers.

The same goes for American companies that sell abroad. If they sell a lot to Japan or the Euro zone, they have to sell
yen or euros to lock in their rates, or risk needing to fire personnel to cover losses incurred by not covering their
asses if the yen or euro goes the wrong way.

I don't mind taxing speculators, especially at such a tiny rate. But it is ridiculous to make this a blanket tax on
all currency transactions in a time when so many businesses are struggling to not fire the workforce they have. It is
small, granted, but the administration needed to police it and go after delinquents, especially for small amounts, would
cost us something as well, not to mention the additional paperwork burden on small businesses that would be affected.

Of all the taxes we should be examining, including, e.g., oil companies that pay no tax at all but make billions,
this seems one that would most burden those who have the least amount of time to worry about it.

I know a company back home in Dallas that imports maybe $20 million a year in Euros, Swiss Francs, Yen, Pounds,
Australian Dollars, etc etc. At .005%, this would bring in $1000, spread out over maybe 200 transactions. Just the
accounting would cost more than $1000. I see this as an idea with a noble, but misplaced intent. We have bigger
fish to fry--let's catch them first.

[muriel_volestrangler]

2. It's a common idea; Germany and France are in favour of it too

http://www.euractiv.com/en/financial-services/germany-france-push-financial-transactions-tax-news-496236

The tax would be collected at the level of the banks, not individual companies. So there would not be any 'accounting' that costs each company or individual extra - it would be added to the spread of prices that banks charge them already.

If the US and the EU went for this, they might have enough muscle to force other countries to sign up for it too (or the ones that the currency traders would risk moving their operations to, anyway).