'Don't tax you, don't tax me, tax that fellow behind the tree." Those famous words were spoken more than 30 years ago by the late Louisiana Sen. Russel B. Long when Congress was looking for ways to raise revenue. Some members of Congress believe they've found the fellow behind the tree: the Wall Street "speculator."

A small increase in trading costs would, according to supporters, be a manageable burden, and one borne by the speculators who the bill's authors apparently believe (to judge by the bill's name) created the financial mess. Across the pond, Prime Minister Gordon Brown of Britain has supported the idea as a way to take the burden off taxpayers during a time of financial crisis. In reality, the tax would deal a poorly-timed blow to long-term investors everywhere.

Proponents of a transactions tax misunderstand the way markets work. The bubble in home prices in the United States was not caused by the rapid buying and selling of individual family homes. The financial crisis was primarily a liquidity crisis and a credit crunch, and the major problem with collateralized mortgage-backed bonds was that they declined significantly in value and became illiquid. A transactions tax that would have reduced trading and made repurchase agreements more costly, could have made the problem even worse.