Time for a Sales Tax on Wall Street Financial Transactions
Consumer advocate, lawyer and author
Here are some questions to consider: What do the Wall Street firms do that is so vital for the national interest? How does speculation contribute to our society? It's time for Wall Street to step up and provide some answers.
The reckless actions of Wall Street institutions led to the collapse of the the U.S. economy and the deep recession of 2008-09. The Wall Street firms looted and gambled trillions in worker pensions and mutual fund savings. The Wall Street traders made billions of dollars in speculative money -- bets on bets -- holding hostage the real economy where money is made by providing goods and services. And the actions of Wall Street resulted in the loss of more than 8 million jobs.
Despite all the lasting harm caused by the casino capitalists, the big banks are now bigger, richer and more powerful than they were when they were bailed out in late 2008. The only ones who were punished were the U.S. taxpayers, who footed the $600 billion bill for the excesses of Wall Street. Brazenly, many firms still continue to gamble with other people's money.
Something needs to change. One necessary change lies in a financial transaction tax -- often referred to as the "Robin Hood Tax." The Robin Hood Tax movement began in the United Kingdom in 2010 with the support of hundreds of economists, prominent public figures and social justice organizations.
Yesterday, Rep. Keith Ellison (D-Minn.) reintroduced "The Inclusive Prosperity Act" -- inspired by the Robin Hood Tax. If passed, the bill (H.R. 1579) would create a minuscule tax on the purchase and sale of derivatives, options and stocks. The tax would be small, half a percent or less of the transaction value, depending on the product. This amounts to half a penny or less per dollar.
Consider this fact: American consumers in most states pay sales taxes on the necessities they purchase -- cars, appliances, clothes, etc. The rate of such sales tax is, in some areas, as high as 7 percent. For example, a schoolteacher or police officer who buys a $100 pair of shoes pays up to $7 in sales taxes. Most people accept the idea of paying such a tax. But what about the folks on Wall Street? A trader can buy and sell millions of dollars of financial products each day without paying a cent in sales taxes. Why should financial transactions be exempt from a small sales tax?
A financial transaction tax could raise $350 billion annually -- money that could be used to repair critical infrastructure, create decent paying jobs, reduce the tax burden on individuals and start to rein in frivolous high-volume trading.
At the news conference announcing the legislation, Rep. Ellison said: "This is a small tax on financial transactions that will allow us to meet the needs of our nation. And didn't America step up, on very short notice, for Wall Street when it needed help? Well, now the American people need help."
Critics of a financial transaction tax have all sorts of excuses. They argue it would harm ordinary investors; it wouldn't, there are protections in place for small investors. Some say it would drive trading to offshore tax havens; but forty countries already have such a tax in place with little compelling evidence showing an adverse effect.
It's obvious that the casino capitalists won't give an ounce of their moral obligation without a fight. However, the endorsement of more than a thousand economists speaks volumes. One supporter, the Capital Institute's John Fullerton (a former managing director at JPMorgan), has stated that a financial transaction tax could have significant impact in lessening the use of high-frequency trading. He has estimated that nearly 70 percent of equity-trading volume falls under this category of highly speculative trading. In June 2012, Fullerton and over 50 other financial industry professionals wrote a letter to the G20 and European leaders advocating for small financial transaction taxes.
The United States had a financial transaction tax from 1914 until 1966. It imposed a tax of 2 cents on every $100 sale or transfer of stock.
The question I posed at the outset was: What does Wall Street do that is so vital for the national interest? To begin to answer it, they can start paying this small tax. As the Robin Hood tax website succinctly puts it with their slogan, it would be "small change for the banks and big change for the people." The $350 billion raised annually with a financial transaction tax would go a long way in helping American workers and bolstering the economy.
If you agree, stop practicing futility. Show a civic pulse. Write and call your Congressional Representative. Tell them you support "The Inclusive Prosperity Act" and they should support it as well. National Nurses United, the largest union and professional association of registered nurses in the United States, has already done this and much more with their national Robin Hood Tax campaign. Visit robinhoodtax.org to learn more.
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