The labor movement is lobbying in Washington and overseas to win support for a financial transactions tax at the upcoming G-20 summit in Toronto.
Their battle looks to be uphill. G-20 finance ministers dropped the proposal at a meeting last week after resistance from Canada.
Labor leaders have been meeting for months with labor and finance ministers around the world to build a groundswell of support for the new tax. But business groups have fought back, saying the proposal could slow the global economic recovery.
Despite the recent setback, union officials are not giving up hope.
“This is the next phase of the battle to rein in Wall Street,” said Dan Pedrotty, director of the AFL-CIO’s office of investment. “It would change the short-term speculative nature of the casino economy.”
Business groups are also continuing their efforts.
The Chamber of Commerce on Wednesday released a letter, co-signed by its sister business associations in Australia, Canada and Japan, that voiced strong opposition to any transactions tax. Governments in all three countries have expressed opposition to the tax.
Treasury Secretary Timothy Geithner has opposed the tax in the past. The White House proposed a bank tax earlier this year, but not a transactions tax.
“Imposing such a tax would harm companies at a time when business expansion is most needed to fuel a fragile global economic recovery,” the letter states.
In addition, the Chamber released a policy statement from business groups in all G-20 countries opposing the tax.
Tom Quaadman, vice president of the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness, compared the lobbying game to “three-dimensional chess” since advocates have to keep track not only of Washington but also of what is going on in foreign capitals.
“We are trying to collectively work all the governments in the G-20 as well as our domestic counterpart here in the U.S., with the administration and Congress,” Quaadman said.
The AFL-CIO wants to see a transactions tax similar to the one proposed in Congress instituted worldwide.
Legislation introduced in both the House and the Senate would put a 0.25 percent tax on stock purchases and options as well as a 0.02 percent tax on trades of financial derivatives. That could raise an estimated $100 billion a year in U.S. government revenue, which then could be used for more job-creation efforts.
Union officials point to Great Britain in arguing that a new tax would not scare away banking business. The United Kingdom has had a tax roughly twice as big as the one proposed by U.S. lawmakers for decades, which has not hampered strong growth in the trading volume of the London Stock Exchange.
Quaadman, however, said the idea that having all G-20 nations sign off on the tax to prevent banking business from moving overseas “is a fallacy.”
“There are always going to be outliers,” said Quaadman, who cited Singapore and Switzerland as examples of countries where banks could move. “Historically, when taxes like this are put in place, capital will go elsewhere where it is welcomed.”
Pedrotty saw the Chamber letter as evidence of “growing concern” from opponents of the tax that foreign governments are moving toward coming down hard on the financial world.
Pedrotty said he has been in touch with Treasury Department officials about the proposal. In addition, AFL-CIO President Richard Trumka, as a member of the president’s economic recovery board, has raised the issue with Paul Volcker, the senior White House economic adviser.
Like business groups, labor has reached out to foreign governments to find support.
In April, Trumka met with labor ministers from the G-20 nations in Washington to push for the transactions tax. Damon Silvers, the AFL-CIO’s policy director, visited Brazil late this week to meet with President Luiz Inácio Lula da Silva and his aides to talk about the tax.
Pedrotty said he and others at the AFL-CIO have been in touch with officials from the European Parliament and International Monetary Fund, as well as finance and labor ministers in France and Germany, about instituting a transactions tax.