Presidential hopeful Michael Bloomberg on Tuesday announced sweeping reforms to the way Wall Street does business. Among his proposals is a 0.1% tax on all financial transactions, meaning that the federal government would exact a duty on all transactions, including stocks, bonds and payments on derivative contracts.
The tax would be phased in over time, scaling up from 0.02% “to monitor and minimize any unintended consequences.”
The former New York City mayor also proposed setting a speed limit for trading and banning payments for priority access to customer orders, which takes aim at high-frequency traders.
“The financial system isn’t working the way it should for most Americans,” Bloomberg said a press release. “As president, I will toughen the Volcker rule, protect Americans from predatory and discriminatory practices – and harness the power of the financial system to spread opportunity and drive economic growth in every community.”
The campaign says its proposed transactions tax would be designed to help raise revenues needed to address wealth inequality across the U.S. It also targets the very industry where Bloomberg made his billions by selling information terminals to traders.
The plan his team released Tuesday included statistics detailing inequalities he’s promised to remedy, including $1.5 trillion in student loan debt, discriminatory lending against people of color and what he categorized as reckless and exploitative ultra-fast trading.
He’s also proposed a variety of other duties on the wealthy as part of his $5 trillion tax plan. But in proposing the transaction tax in particular, Bloomberg moves closer to other progressive candidates like Vermont Sen. Bernie Sanders, who has for years championed a similar tax and is doing so again in 2020.
But some, including the U.S. Chamber of Commerce, argue that transaction taxes are regressive, driving up the amount everyday investors pay on their retirement funds.
“Basically, this is a regressive tax on main street retirement savings, drive up costs of home mortgages and make financial markets more inefficient,” Tom Quaadman of the U.S. Chamber of Commerce wrote to CNBC. “This is why the Kennedy/Johnson Administration repealed the tax in the 1960’s.”
“This tax will not raise the revenue claimed and will actually cost the economy more” than it would raise, he added.
Bloomberg’s campaign cites a 2015 study by the Tax Policy Center in claiming that “two-thirds of the burden” of the transaction tax would fall on the top 10% of Americans by income. But even the authors of the Tax Policy Center paper concede that “the longer-term distributional effects would be more mixed than in the short run” as capital becomes scarcer over time.
Former Vice President and 2020 contender Joe Biden also appears to support a transaction tax. Biden told CNBC in December that “I think we should have a financial transaction tax” despite his team’s estimates that the duty wouldn’t generate significant revenue for the Treasury coffers.
Bloomberg’s plan also seeks to bolster the Consumer Financial Protection Bureau, an office first proposed by 2020 rival Sen. Elizabeth Warren of Massachusetts. The bureau has eased regulations on payday lenders and abandoned suits against the industry under the Trump administration.
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