Q: Is “Obama’s finance team” recommending a 1 percent tax on all bank transactions, as a chain e-mail claims?
A: No. This idea was first floated in 2004 by one House member, who says it would replace the federal income tax and eliminate the national debt. So far it has gone nowhere.
FULL QUESTION
Here is the latest email I have received that I figure is more bunk, but have yet to find facts about this. I am still looking! Thanks!
Subject: 1% tax on all bank transactions Wonder what the ones who voted for this idiot think now? One percent transaction tax is proposed President Obama’s finance team is recommending a transaction tax. His plan is to sneak it in after the November election to keep it under the radar. This is a 1% tax on all transactions at any financial institution i. e. Banks, Credit Unions, etc.. A ny deposit you make, or move around within your account, i. e. transfer to, will have a 1% tax charged. If your pay check or your social Security or whatever is direct deposit, 1% tax charged. If you hand carry a check in to deposit, 1% tax charged, If you take cash in to deposit, 1% tax charged.This is from the man who promised that if you make under $250,000 per year, you will not see one penny of new tax. Keep your eyes and ears open, you will be amazed at what you learn. Some will say aw it’s just 1%… remember once the tax is there they can raise it at will.
FULL ANSWER
This is an idea originally floated in 2004 by a single member of Congress, Democratic Rep. Chaka Fattah of Pennsylvania. So far it has attracted little support and gone nowhere. The White House has not endorsed it.
Fattah has a web page devoted to explaining the original idea from 2004, which he called the “Transform America Transaction Fee.” In its latest incarnation, he calls it the “Debt Free America Act.” It would repeal the federal income tax (a feature not mentioned in the chain e-mail message) and supposedly still generate enough revenue to eliminate the national debt. It also contains a tax credit that would, at least in theory, offset the tax for families making less than $250,000 a year.
Fattah explained his proposal in a press release dated Feb. 23. His plan also has been summarized in a newspaper column by Democratic commentator Lanny Davis.
Fattah’s original bill from 2004 (H.R. 3759) would merely have required the U.S. Treasury to conduct a one-year feasibility study of a 1 percent transaction fee. Back then, he touted the possibility that such a system would bring in so much money it would allow for greatly increased federal spending, saying the “excess funds” would “provide universal health care, support an equitable public school finance system, and fund economic development in urban and rural areas,” in addition to extinguishing the national debt and eliminating all other federal taxes. That bill died without becoming law, or even attracting a single cosponsor.
Fattah tried again in 2005, with H.R. 1601, and again in 2007 with H.R. 2130 (which had a single cosponsor, Democratic Rep. Brian Baird of Washington). But both bills died without any action being taken. Last year he introduced a fourth bill to require a study, H.R. 1703, which attracted no cosponsors. That bill is still languishing in committee.
With no study in sight, Fattah this year introduced a bill that would establish the fee and repeal the federal income tax. The latest bill is H.R. 4646, introduced on Feb. 23, 2010. The congressman is now saying less about increased spending, and more about eliminating the debt: “If Congress fails to act, inflationary pressures triggered by staggering debt will create economic conditions unlike anything ever experienced in the history of this country, including the Great Depression.”
Fattah has also added a tax credit designed to eliminate the impact of the measure on those making less than $250,000 a year. But it’s basically the same idea — replacing current federal taxes with a penny-on-the-dollar tax on transactions. The latest bill was referred routinely to the several committees that have jurisdiction over its various aspects. As of Sept. 5, 2010, none of the committees had scheduled any action on it.
We spoke to Rep. Fattah about it, and he said he’s hopeful the president’s National Commission on Fiscal Responsibility and Reform will see merit in his proposal. But so far, he said, “No one at the White House has ever commented on this in any fashion.”
As usual, we’re only describing the bill, not saying it’s a good idea or a bad idea. But it’s just not true that “Obama’s finance team” supports it.
– Brooks Jackson
Update, June 5, 2012: Rep. Fattah’s H.R. 4646 died with the expiration of the 111th Congress. But viral emails about it continued to circulate widely, claiming it would take a bite out of Social Security checks when they are deposited electronically. In the 112th Congress, however, H.R. 4646 was actually a bill to suspend import duties on certain heavy duty grill brushes.
In the 112th Congress, the new version of Rep. Fattah’s 1 percent transaction tax was embodied in H.R. 1125, and Fattah once again called it the “Debt Free America Act.” This time, he added exceptions to the tax for “any deposit into a personal account of an individual” (such as Social Security checks) and for “any transfer between accounts of the taxpayer” (such as withdrawals from tax-deferred retirement accounts). Nevertheless, the new bill again attracted no cosponsors and was sitting in the Ways and Means Committee with no action scheduled.
Update, Sept. 29, 2010: Some versions of this message incorrectly identify Democratic Rep. Peter DeFazio of Oregon and Democratic Sen. Tom Harkin of Iowa as sponsors of the legislation. Rep. DeFazio, whose office has received many inquiries about the message, told us through a spokesman that he not only isn’t cosponsoring the bill, he doesn’t support it.
Rep. DeFazio, Sept. 29: I do not support Rep. Fattah’s H.R. 4646 because it wrongly targets all financial transactions, rather than just focusing on the Wall Street speculators that got us into this economic mess. An average American making normal day-to-day transfers of money should not be taxed on those transactions .
DeFazio sponsored a different and much narrower transaction tax proposal in 2009, which he called the ‘‘Let Wall Street Pay for Wall Street’s Bailout Act of 2009.’’ That was H.R. 1068. DeFazio’s tax would have been only 0.25 percent, would have applied only to securities and commodities transactions, and would have fallen to zero once it had recouped the net cost of the Troubled Asset Relief Program. It had 13 cosponsors, but the only similarities to Fattah’s proposal is that it involved a transaction tax, and also did not move out of committee.
Sen. Harkin’s version of the 0.25 percent transaction tax on securities and commodities was S. 2927, the “Wall Street Fair Share Act.” It attracted three cosponsors and also did not move out of committee.
Sources
Fattah, Rep. Chaka. “Transform America Transaction Fee” Undated Web page accessed 7 Sep 2010.
Fattah, Rep. Chaka. “Debt Free America Act.” Undated Web page accessed 7 Sep 2010.
Fattah, Rep. Chaka. “America: A Debt Free Future: Penny-on-the-Dollar Transaction Fee Will Eliminate the National Debt.”
Press release. 23 Feb 2010. Davis, Lanny. “A debt-free America? Yes — it’s possible.” The Hill. 7 Jul 2010.
108th Congress; 2nd Session H.R. 3759. 3 Feb 2004.
109th Congress; 1st Session H.R. 1601.
13 Apr 2005. 111th Congress; 1st Session H.R. 1703.
25 Mar 2009. 110th Congress; 1st Session H.R. 2130. 3 May 2007.
Telephone interview with Rep. Chaka Fattah. 7 Sep 2010.
Email exchange with Michael Hayes, Legislative Correspondent. office of Congressman Peter DeFazio. 29 Sep 2010.