Here in the U.S., the idea of a financial transaction tax has never gotten any real traction in Congress, but that may be about to change.
Sen. Tom Harkin of Iowa and Rep. Peter DeFazio of Oregon are planning to reintroduce a bill this month that would levy a Robin Hood tax right here in the States at an even higher rate than what looks set to go into effect in Europe.
Pennies on the Pound
If implemented as proposed, Europe's version of the tax will be as follows: a 0.1 percent levy on stock and bond trades and a 0.01 percent levy on derivatives trades.
For the U.S. version, Harkin and DeFazio are calling for a 0.03 percent tax on stock, bond, and derivatives trades, or 3 cents for every $100 worth of transactions.
The name of the proposed U.S. tax is The Wall Street Trading and Speculators Tax. According to Harkin, proceeds would "help raise necessary funds to invest in our infrastructure and the education of our children."
A nearly identical bill was introduced by the same two legislators in November 2011, but got nowhere. So why are its chances better now?
C'mon, Everybody's Doing It
A combination of peer pressure and popular sentiment might make a stronger case for a financial transaction tax this time around. With large economies in Europe all but certain to levy the tax -- and with heavy hitters like Germany, France, Spain, and Italy signed on -- the U.S. will feel more under the gun than ever to come up with its own version. But notable for its opposition to the tax: the government of England, where The City is both the heart of London and a world financial capital to rival Wall Street.
And it's no secret to the average person that the combined shenanigans of Wall Street and The City were behind the financial crash and ensuing global recession. To add insult to injury, taxpayers watched as many of the big banks at the root of the crisis were bailed out to the tune of billions one minute, only to turn around and pay their employees and executives hundreds of millions in bonuses the next.
As such, there's strong popular feeling on both sides of the Atlantic for some sort of general recompense and contribution to the greater good from the banks.
Also like much of Europe, the U.S. has a high level of public debt and runs chronic budget deficits. So the federal government is looking for quick and politically easy sources of revenue. A tax levied on big, unpopular financial institutions fits that bill perfectly.
Who Wins, Who Loses?
Critics argue that a financial transaction tax will hurt the little guys: middle-class investors who are just trying to save for their kids' college, retirement, or a rainy day. But this wouldn't be the case.
As is clear from the tax's official title, speculators are one of the main targets of this bill: professionals who trade in high volumes and extremely high speeds and whose actions, as a result, can sometimes destabilize markets. It's hoped that a financial transaction tax of this kind would make that sort of trading prohibitively expensive and therefore make markets more stable for everyone.
Last time around, Harkin and DeFazio's bill drew the support of senators such as Bernie Sanders (I-Vt.) and Sherrod Brown (D-Ohio) -- no strangers to anti-big-bank legislation -- as well as a host of similarly minded congressional representatives. If the resubmitted bill picks up any real traction this time around, expect support from the same bunch and probably many more, now that Europe has made its move and there's some real momentum building for a Robin Hood tax on the Continent.
But also expect staunch opposition, and not just from conservative politicians. Wall Street and the financial services industry will certainly get in on the fight, as well, if not under the withering glare of the public eye, then behind the scenes. Because while a tax of 3 cents on every $100 of trades doesn't add up to much when you're building a personal retirement portfolio, it can add up to quite a pretty penny when you're building a hedge fund.
John Grgurich is a regular contributor to The Motley Fool. Follow his dispatches from the bleeding heart of capitalism on Twitter @TMFGrgurich.