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Letter to the Honorable Orrin G. Hatch 1 (December 12, 2011)

handle is hein.congrec/cbo10604 and id is 1 raw text is: CONGRESSIONAL BUDGET OFFICE Douglas W. Elmendorf, Director U.S. Congress Washington, DC 20515 December 12, 2011 Honorable Orrin G. Hatch Ranking Member Committee on Finance United States Senate Washington, DC 20510 Dear Senator: This letter responds to three questions you posed about a tax on financial transactions that would be imposed if the Wall Street Trading and Speculators Tax Act (H.R. 3313 or S. 1787) was enacted: * What impact would the proposed tax have on gross domestic product (GDP) and on U.S. jobs? * What impact would the tax have on municipal financing, including the cost to municipalities of funding their activities? * What effect would the tax have on the depth and liquidity of the global market for U.S. Treasury securities? The staff of the Joint Committee on Taxation is providing responses to your other questions. The Proposed Tax on Financial Transactions Beginning on January 1, 2013, H.R. 3313 and S. 1787 would impose a tax on most purchases of securities and transactions involving derivatives. For a transaction involving a stock, bond, or other debt obligation, the tax would be 0.03 percent of the value of the security. For a transaction involving a derivative, the tax would be 0.03 percent of any payment made under the terms of the derivative contract, including the price paid for the contract when it was written, any periodic payments, and any amount paid when the contract expired. The tax would not apply to the initial issuance of stock or debt securities, to trading in debt instruments that have fixed maturities of no more than 100 days, or to currency transactions (although transactions involving currency derivatives would be subject to the tax). The tax would be imposed on trading within the United States and on transactions outside the country if any party to the transaction is a U.S. corporation, partnership, or individual. 1 A derivative is a security that derives its value from another security or commodity. Types of derivatives include options, forwards, futures, and swaps. www.cbo.gov

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