Congresswoman Hirono Supports Wall Street "Transaction Tax' Legislation

Press Release

Congresswoman Mazie K. Hirono (D-Hawaii) today announced her strong support for legislation that would tax stock trades and other financial transactions to support job creation and reduce the budget deficit.

Congresswoman Hirono is an original cosponsor of the bill crafted by Congressman Peter DeFazio (D-Oregon) that assesses a very small tax on Wall Street securities transactions. The legislation, Let Wall Street Pay for the Restoration of Main Street Act, has strong support from economists, Wall Street investors, labor organizations, and consumer groups.

"Americans rightly ask--now that Wall Street is getting back on its feet--what about Main Street, where people are struggling to keep their jobs, their homes, and put food on the table?" said Congresswoman Hirono.

"Taxpayers have done their part to stabilize the financial system, which was severely affected by excessive speculation on Wall Street. Now it's Wall Street's turn to help Main Street. This bill will generate the funds needed to rebuild Main Street by creating jobs and investing in our future," Hirono said.

The legislation would assess a small securities transaction tax on Wall Street. Specifically, the securities transaction tax would apply to the following:

· Stock transactions (tax rate will be 1/4 of 1 percent--0.25%),

· Futures contracts to buy or sell a specified commodity of standardized quality at a certain date in the future, at a market determined price (tax rate will be 0.02%)

· Swaps between two firms on certain benefits of one party's financial instrument for those of the other party's financial instrument (tax rate will be 0.02%)

· Credit default swaps where a contract is swapped through a series of payments in exchange for a payoff if a credit instrument (typically a bond or loan) goes into default (fails to pay) (tax rate will be 0.02%)

· Options, which are contracts between a buyer and a seller that give the buyer the right, but not the obligation, to buy or to sell a particular asset on or before the option's expiration time, at an agreed upon price (at the rate of the underlying asset)

A transaction tax has the support of over 200 economists, including Nobel Prize winner Paul Krugman, business leaders like John Bogle, the founder of Vanguard, and labor and consumer organizations such as AFL-CIO and Americans for Financial Reform. It will provide a disincentive for excessive speculation. Much of the excessive risk on Wall Street is in the form of high-volume short-term speculative trading. The tax could raise approximately $150 billion a year.

To ensure the tax is appropriately targeted to speculators and has no impact on the average investor and pension funds, the tax will be exempted for:

· tax-favored retirement accounts
· mutual funds
· education savings accounts
· health savings accounts
· the first $100,000 of transactions annually that are not already exempted

Half the revenue generated by this transaction tax (approximately $75 billion) would be deposited in a Job Creation Reserve to fund the creation of good paying jobs and put Americans back to work rebuilding our nation's infrastructure.

Every $1 billion of federal infrastructure investment could create or sustain over 34,000 American jobs and generate up to $6.2 billion in economic activity. The Surface Transportation Authorization Act of 2009, which could create or sustain over 12.5 million family wage jobs, would be partially funded through this tax. The second half of the revenue generated by this transaction tax (approximately $75 billion) would be used to directly reduce the deficit.

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