"An Easy Grab"

Ever since George Bush quietly acknowledged last month that "increased tax revenues" would be necessary to reduce the budget deficit, everyone in Washington has been running for cover. No wonder. Louisiana's legendary Russell Long once described raising taxes as a game of "don't tax me, don't tax thee, tax that fellow behind the tree."

Last week Wall Street was wondering whether it was the fellow behind the tree. Bush Administration officials floated the idea that they might consider raising the tiny tax on stock and bond transactions -- one-third of 1% -- to help erase the deficit. The leak looked serious because security-transfer taxes are easy to collect, politically painless and potentially lucrative.

The idea appears to have the support of both Budget Director Richard Darman and Treasury Secretary Nicholas Brady. Darman is intrigued with the idea because he knows he must raise taxes on wealthier Americans if he is to win Democratic support for Bush's cherished reduction in the capital-gains tax; he also knows that Bush is loath to raise income taxes to achieve this. Brady, on the other hand, has long objected to the quick turnover of securities by stock- and bondholders. Ever since he headed a blue-ribbon panel that investigated the 1987 Wall Street crash, Brady has waged a personal campaign to get people to make long-term investments rather than take short-term profits. A tax on security transactions, Brady feels, would encourage investors to take the longer view.

One plan is to boost the current tax from one-third of 1% of the value of each stock trade to 5% of a transaction's value, which would raise an estimated $60 billion over five years. "It's an easy grab," admitted a securities lobbyist fighting the plan. "It raises billions from people who don't scream and may not even feel it."

Securities lobbyists, in a desperate attempt to marshal opponents on Capitol Hill, immediately labeled the transfer levy a "tax on savings." Other critics note that Brady's own commission pointed out that a similar plan proposed by lawmakers in October 1987 helped trigger the crash.

Bush officials dismiss such fearmongering, saying the market is protected from the sort of dive it took in 1987. And despite the cries of pain, several generals in Wall Street's jihad against Darman and Brady acknowledged that they could live with a smaller increase, perhaps two-thirds of 1% of a - transaction's value, which would raise $2 billion to $3 billion a year. Wall Street knows that the only thing worse than a tax on trading is a sick economy.