Following the recent GameStop trading frenzy, Congress is finally taking steps toward a long-overdue reckoning on Wall Street. Recently, members of the House Financial Services Committee heard from major hedge funds, GameStop, Robinhood and Reddit to figure out what happened last month and how to protect retail and small traders from Wall Street’s greedy antics.
Already, some lawmakers have called for actions against Wall Street in the aftermath of the GameStop saga, with progressive members of the caucus resurrecting the idea of a tax on Wall Street trading known as the financial transaction tax. Proponents argue that a small tax — 0.1% — would reduce high-frequency trading practices that only benefit the wealthy. This may seem like a noble cause, but it is a misguided policy with big unintended consequences in practice.
The Congressional Budget Office (CBO) estimates that a financial transaction tax could generate $777 billion over the next decade. Sure, this is a lot of money, and it could help to fund many programs or cancel debt. But, what lawmakers fail to consider is Wall Street would not be footing the bill. Anyone who relies on a (401)k, pension, 529 account, or retirement fund to provide for themselves in old age or to further their children’s education would be a casualty of this tax.
In fact, my constituents are most likely to feel the biggest impacts of a financial transaction tax. However, they are not bankers on Wall Street or the hedge fund managers whose power and influence we are trying to reel in with this tax. Instead, they are hard-working Michiganders, small business owners and productive members of Kent County.
I ran for county commissioner because I saw that the people of my district were struggling and needed help. I know that they work hard and rely on their employment to support themselves and their families and to save for their future. They should not be penalized for responsible financial practices, nor should they be penalized for sensibly saving for retirement. And not only does this tax have the potential to put a dent in their own savings, but it puts their children at a disadvantage too. Many of these folks have saved for years to send their children to college with 529 education accounts.
If a tax were to be levied on these investments, parents might have to decide between deferring some of their children’s dreams or delaying their retirement, despite preparing for both.
Michiganders are just trying to make an honest living and save for major investments like retirement and college. After more than a year of the pandemic we have all suffered through, the last thing we need is something that makes it harder for small business owners and working-class people to save. I hope that lawmakers in Washington will reject the notion of a financial transaction tax, and instead focus on policies that will put families and small business owners back on their feet.
Monica Sparks is a Kent County commissioner.