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Obama and the Transaction Tax

Proposal Would Levy 1 Percent Charge

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Obama and the Transaction Tax

Will this cost you a 1-percent tax?

Chris Hondros/Getty Images
Updated September 11, 2010

As if those mysterious ATM fees aren't annoying enough.

Numerous widely circulated emails claim the Obama White House is supporting a plan to impose a 1 percent tax on every transaction you make - from bank deposits and withdrawals to purchases at the grocery store.

"President Obama's finance team is recommending a transaction tax," one such viral email reads. "His plan is to sneak it in after the November election to keep it under the radar. This is a 1% tax on all transaction at any financial institution i.e. Banks, Credit Unions, extra."

See more: 5 Wackiest Myths About Obama

"Any deposit you make, or move around within your account, i.e. transfer to, will have a 1% tax charged," the email continues.

"If your pay check or your social Security or whatever is direct deposit, 1% tax charged. If you hand carry a check in to deposit, 1% tax charged, If you take cash in to deposit, 1% tax charged. This is from the man who promised that if you make under $250,000 per year, you will not see one penny of new tax."

Is there any substance to this transaction tax?

Well, yes and no. But mostly no.

There have, in fact, been several bills before Congress that would impose such a transaction tax. But all but one has died in committee.

Bill Would Impose Transaction Tax

A Democratic congressman from Pennsylvania, U.S. Rep. Chaka Fattah, has tried without success to get such a transaction tax passed numerous times in recent years.

He's introduced such legislation in 2004, 2005, 2007 and 2010.

Fattah said his "Debt Free America" proposal would generate revenue that could be used to reduce the growing national debt.

"Alarmingly, there is near unanimity in the consensus of economists, analysts, and policymakers that the U.S. debt is accumulating at an unsustainable rate," Fattah said in announcing his proposal in 2010.

"Similar to the mortgage meltdown that precipitated the worst financial crisis since the Great Depression, the easy money that is financing the exploding federal deficit will soon come to an end," Fattah said.

To offset the impact of the transaction tax, Fattah's legislation - H.R. 4646 - would give a 1 percent tax credit to families that earn less than $250,000.

According to Fattah, the collection of a transaction tax would pay off the national debt - and replace the federal income tax (a fact that the viral emails fail to mention).

The key question is: Does Obama - or anyone on his so-called "finance team" - support such an idea?

If they do, they're not saying.

Which isn't a good sign for Fattah or his transaction tax.

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