To understand why London, not New York, was named the greatest financial hub in a report by Mastercard Inc., pay a quick visit to Washington — and to the Capitol building, to be more precise. If you pay attention, you may hear an echo of William Jennings Bryan, the silver-tongued Nebraska orator who ran for president in 1896 on a “cross of gold” platform of easy money for the poor, a new income tax for the wealthy, and an undisguised disdain for the East Coast in general and New York City in particular. Bryan wanted many new laws for his vision of a new society.

America and its financial centers such as New York need stable and predictable laws to succeed. Like Bryan, the old-fashioned populists who run Congress today have no need for such stability. A few years ago, they supported Sarbanes-Oxley to hobble publicly traded corporations. Today, they target private equity.

Last Thursday, the chairman and ranking Republican of the Senate Finance Committee — senators Baucus, a Democrat of Montana, and Grassley, a Republican of Iowa — introduced legislation that would tax all publicly traded partnerships as corporations. Currently, private equity funds that go public can be taxed as partnerships if 90% of their income is passive, such as capital gains, dividends, and interest, rather than actively producing financial services. Under current law, the blended tax rate is around 15%. If passed, the Baucus-Grassley bill would increase that tax rate to the corporate rate or as much as 35%.

Not coincidentally, the Baucus-Grassley bill appears on the heels of the Blackstone IPO as a limited partnership in March. Messrs. Baucus and Grassley have sent a letter to the SEC that suggests the possibility of delaying the approval of Blackstone’s IPO. According to the letter, “Investors and shareholders will be in a more informed position after Congress and the Treasury have had an opportunity to speak to the serious tax policy questions raised by the Blackstone IPO.”

If adopted, the Baucus-Grassley legislation would set a five-year grace period before a business such as Blackstone would have to pay the corporate tax rate. Nonetheless, the Baucus-Grassley bill could reduce Blackstone’s $40 billion valuation by 15% to 20% and net earnings by as much as $250 million. Those numbers would hardly be noticed in a federal budget of $2.8 trillion, but in the real world of finance, companies such as Blackstone will more than take notice.

Messrs. Baucus and Grassley are not content merely to discourage financial activities of publicly traded companies. They have a larger agenda to tax high-income Americans generally and private equity in particular. They are expected to introduce a bill that would tax carried interest, future profits that fund managers take when they buy and sell companies, at regular income at as much as 35% rather than the capital gains rate of 15%.

The upper Midwest has a long and distinguished tradition of sending populists to Congress to rail against financial interests, and those of the East in particular. A century ago, cheap money resulting from populist laws shifted wealth to borrowers in the Midwest from lenders in the East. The current economics of corporate governance and corporate taxation are quite different.

Imposing higher taxes on private equity firms such as Blackstone would not shift wealth from New York to Des Moines or Missoula or to anywhere else in America. Rather, over-taxed financial activity, and the wealth associated with it, would shift from New York to London, Tokyo, Hong Kong, and cities in other countries that welcome rather than discourage private equity activity. The wealth would move to more conducive environments should our government unwisely seek to punish it.

The Baucus-Grassley initiatives may not pass this year, but they might in the not too distant future. The failure of bad legislation today is not enough to reassure investors that America will be the home of stable financial laws tomorrow. There remains too much demand for ludicrous new laws in Washington, which in turn discourage financial activity in New York and around America.

We need a new form of populism: government officials who see clear, predictable, enforceable, and rarely changed laws as the foundation for both civil society and the American economy. Sadly, those officials are scarce in Congress.

A former FCC commissioner, Mr. Furchtgott-Roth is president of Furchtgott-Roth Economic Enterprises. He can be reached at hfr@furchtgott-roth.com.