As the Misguided $1.4 Trillion Cuts Begin, a Wall Street Tax Looks Like a No-Brainer
The proposal will obviously be a hard sell given the hegemony of anti-tax ideology in the nation’s capital.
But a financial transactions tax is precisely the kind of public policy we need to guarantee the long-term fiscal health of the public sector in the country.
The bill, reintroduced Feb. 28 by Sen. Tom Harkin (D-Iowa) and Rep. Peter DeFazio (D-Ore.), calls for a tax on Wall Street traders that would bring in $352 billion over 10 years. The financial transactions tax would impose a three-cent charge for every $100 in trades.
“We need the new revenue that would be generated by this tax in order to reduce deficits and maintain critical investments in education, infrastructure, and job creation,” Harkin said. “And there is no question that Wall Street can easily bear this modest tax. This Wall Street tax is a simple matter of fairness and fiscal sanity.”
“This Wall Street Speculator Tax should be a no-brainer,” DeFazio said. “It will raise significant revenue that we desperately need and reins in the excessive speculative activity that has destabilized our financial system.”
What are some compelling arguments for the tax?
• Twenty-three countries--including the United Kingdom, Switzerland, Hong Kong, and Japan—have financial transactions taxes.
Eleven European countries have announced their plans to adopt such a tax next year as a way to address the financial troubles engulfing the continent, where austere economic policies have caused the living standards of millions to plummet. In the United States, the new revenue could help reverse a substantial portion of the cuts imposed by our austerity program known as the sequester.
• By targeting speculation, the tax would discourage the risky trades that destabilize the market and create the type of volatility that led to the 2008 crash.
• The tax would not significantly harm middle-class investors. A 401(k) account holder with $60,000 in savings would pay a tax of $18 a year. The bill provides tax credits for contributions to tax-benefitted pension, education and health-savings plans.
• A financial transaction tax would help the economy by encouraging longer-term productive investment. It would do that by reducing the volume of short-term unproductive trading.
• The federal government needs the extra revenue. After years of tax giveaways to corporations and wealthy individuals, it is starved for funds. The U.S. government is now operating with its lowest level of revenues in more than 60 years.
• Wall Street can easily afford the tax. In a 2010 report, the International Monetary Fund found that financial sectors—particularly the one in the United States—are significantly under-taxed.
“The modest tax would discourage an enormous amount of short-term trading while having almost no impact on the ability of markets to finance productive investment,” said Dean Baker, co-director of the Center for Economic and Policy Research.
“The cost of the tax would be borne almost entirely by the financial industry, since for most investors the money saved as a result of lower trading volume will offset the higher cost of trades,” Baker said. “At a time when Congress and the president are looking to cut Social Security, Medicare, and other essential programs, the idea of getting $40 billion a year from taxing speculation in the financial industry looks very attractive.”
“Both the economic crisis and the deficit crisis are a direct result of the greed, recklessness, and illegal behavior on Wall Street,” said Bernie Sanders (I-Vt.), a co-sponsor of the financial transactions tax bill.
“This bill will reduce gambling on Wall Street, encourage the financial sector to invest in the job-creating productive economy, and significantly reduce the deficit. At a time when we have a record-breaking national debt, the very least we can do is demand that Wall Street pay its fair share in taxes.”
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