House Democratic leaders are considering imposing a new tax on stock transactions to fund a jobs bill, leadership sources tell The Hill.
Rep. Ed Perlmutter (D-Colo.) has been making the case for such a Wall Street tax, and House leaders have started paying attention as they look for a way to pay for the jobs bill, leadership sources said.
The idea is attractive because it’s very small, likely 0.25 percent of each trade. And since Wall Street is perceived by many as having caused the economic slump, brokers have little political standing to try to stop it.
It also has the support of the nation’s largest labor union.
The AFL-CIO, one of the Democratic Party’s most powerful allies, suggested the idea in August.
The group’s policy director, Thea Lee, estimated the tax could raise between $50 billion and $100 billion per year.
Small- and medium-sized investors would hardly notice a transaction tax, but major trading firms may see it as a significant threat to their profits.
Leading financial lobbyists say the tax would harm the economy.
“It would impact all Americans, from retirees to [the] self-employed to parents saving for their kids’ education. It would place permanent handcuffs on the economy,” said Scott Talbott, senior vice president at the Financial Services Roundtable, which represents 100 large financial companies.
“It would clip the wings of the economy just as it is starting to recover,” he added.
Rep. Peter DeFazio (D-Ore.), a senior member of the Transportation and Infrastructure Committee, said that in addition to the transaction tax, there is talk of using money from the $700 billion Wall Street bailout and other sources. But leaders aren’t looking at an increase in the gas tax.
“There’s very little talk about user fees,” DeFazio said.
Leaders said they are trying to pass a jobs bill before leaving for Christmas, at least in the House.
And the legislation could include a renewed emphasis on highway construction.
Committee Chairman Jim Oberstar (D-Minn.) said that transportation will be a “centerpiece” of the jobs legislation. DeFazio said that though only 4 percent of the stimulus package earlier this year went to transportation, it created 25 percent of the jobs.
“We’re a proven job-generator,” DeFazio said. “The big problem has been the White House, and if the White House is getting on board, I don’t think there will be a problem.”
Republicans said that if Democrats want to create jobs, they should look at ideas that GOP lawmakers have been pressing for months.
“Republicans have been working for months now trying to forge solutions as to how to get Americans back to work,” said House Minority Whip Eric CantorEric Ivan CantorBottom line Virginia GOP candidates for governor gear up for convention Cantor: 'Level of craziness' in Washington has increased 'on both sides' MORE (R-Va.).
Speaker Nancy Pelosi (D-Calif.) has asked key committee chairmen for ideas on job creation, said House Majority Leader Steny Hoyer (D-Md.).
There has been debate over whether to do one large, catch-all bill or several topic-specific bills. Hoyer said he expected the work of several committees to be wrapped into one bill.
Hoyer declined to give a dollar figure for what Democrats are planning, but he said he expects Democrats will, at a minimum, extend unemployment benefits and COBRA health insurance assistance for the unemployed.
Other options include aid to states to preserve public-sector jobs and tax breaks for creating jobs. Democrats have consulted extensively with a group of economists, but Hoyer said there have been “differences of opinion” on what tactics are most effective.
The action comes after a report from the Labor Department that showed unemployment hitting 10.2 percent in October. The jobless rate is expected to continue to rise in coming months.
The 26-year high in the unemployment rate has spiked concerns among Democrats at the White House and in both chambers of Congress, particularly with midterm elections less than a year away.
Hoyer rejected the characterization of the House effort as a “second stimulus,” saying it will be more narrowly targeted than the $787 billion stimulus.
The massive stimulus bill also has become a target for conservatives angry at the surge in federal spending. The jobs bill could raise those arguments again from Republicans who oppose public spending and conservative “Blue Dog” Democrats who want to see the spending offset by cuts in programs or by tax hikes
“When you have a sick economy, you have to do something to fix it,” said Blue Dog Rep. Dennis Cardoza (D-Calif.). “But there are real and legitimate concerns about the deficit.”
But Hoyer indicated that the spending might not be offset, because increasing taxes would counteract the effort to boost the economy.
“The challenge we have is to stimulate the economy and not depress it at the same time,” Hoyer said.
The Senate is also expected to work on a jobs initiative, though it is unclear when the Senate might take up legislation. That chamber is expected to be busy with healthcare reform for the rest of 2009.
Senate Majority Leader Harry ReidHarry Mason ReidDemocrats say Biden must get more involved in budget fight Biden looks to climate to sell economic agenda Justice Breyer issues warning on remaking Supreme Court: 'What goes around comes around' MORE (D-Nev.) told Democrats at their weekly policy lunch last week that he plans to bring up a jobs measure, but did not say when he would do so.
The administration announced last week that it would hold a jobs summit, specifying on Monday evening that the summit will take place on Dec. 3.
Obama will follow that event with a trip to Allentown, Pa., for a forum on jobs, part of a “Main Street tour” announced by the White House, in which Obama will travel to a number of cities and towns over the next few months.
Alexander Bolton and Silla Brush contributed to this article.