Wednesday, April 06, 2016
Wall
Street Should Pay a Sales Tax, Too
When a high-rolling trader buys millions of
dollars' worth of stocks or derivatives, there's no levy at all.
(Photo: Elvert Barnes / Flickr)
In case there was any doubt, the presidential
election fight has confirmed that blasting Wall Street, even eight years after
the financial crisis, is still a vote-getter.
Hillary Clinton has said she’d like to jail
more bankers. Donald Trump has skewered the hedge fund managers who are
“getting away with murder.” And Bernie Sanders has made Wall Street
accountability a centerpiece of his campaign.
Of course, financial industry lobbyists
aren’t about to take this lying down. In recent weeks, they’ve turned up the
heat on lawmakers to block one particular measure that Sanders has mentioned in
nearly every stump speech: taxing Wall Street speculation.
Americans are used to paying sales taxes on
basic goods and services, like a spring jacket, a gallon of gas, or a
restaurant meal. But when a Wall Street trader buys millions of dollars’ worth
of stocks or derivatives, there’s no tax at all.
Sanders has introduced a bill called
the Inclusive
Prosperity Act, which would correct that imbalance by placing a
small tax of just a fraction of a percent on all financial trades. It wouldn’t
apply to ordinary consumer transactions such as ATM withdrawals or wire
transfers.
Wall Street lobbyists are claiming that such
taxes would still hurt mom-and-pop investors. The Investment Company Institute,
which represents the trading arms of J.P. Morgan, Goldman Sachs, and the
leading hedge funds, recently fired off a letter to
Congress arguing that a Wall Street speculation tax would “harm all investors,
especially middle-income American workers saving for retirement.”
In reality, the type of tax Sanders is promoting
would target the high rollers in the financial casino. Because the tax applies
to every trade, it would hit the traders engaging in computerized split-second
stock-flipping the hardest. That’s a good thing, because that kind of trading
makes markets less stable and adds no real value to the Main Street economy.
For ordinary investors in low-turnover
pension funds, the costs would be negligible — like a tiny insurance fee to
protect against crashes caused by reckless and often automated speculation.
Under the Sanders plan, the tax rate would
range from 0.005 percent to 0.5 percent, depending on the financial instrument.
By contrast, ordinary sales taxes currently average 8.4 percent.
In addition to discouraging
dangerous speculation, such taxes would also raise money that could be spent on
urgent needs, like making college affordable and fixing our crumbling roads and
bridges.
Since it’s hard to know how traders will
react, it’s difficult to calculate exactly how much money we’re talking. Robert
Pollin, a professor at the University of Massachusetts-Amherst, predicts the
Inclusive Prosperity Act could generate around $300 billion per
year in new federal tax dollars. The Tax Policy
Center estimates that a financial transaction tax with a
slightly lower rate could raise up to $541 billion over 10 years.
More than 30 countries already
have forms of speculation taxes that raise billions of dollars per year. These
include many fast-growing financial markets, such as the UK, Hong Kong,
Singapore, and Switzerland. In the European Union,
10 countries have committed to implementing the world’s first regional
transaction tax.
It’s encouraging to see Wall Street lobbyists
agitated over the possibility of a speculation tax. It means this option is
finally gaining the traction it deserves.
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Donations can be sent
to the Baltimore Nonviolence Center, 325 E. 25th St., Baltimore, MD
21218. Ph: 410-323-1607; Email: mobuszewski [at] verizon.net. Go to http://baltimorenonviolencecenter.blogspot.com/
"The master class
has always declared the wars; the subject class has always fought the battles.
The master class has had all to gain and nothing to lose, while the subject
class has had nothing to gain and everything to lose--especially their
lives." Eugene Victor Debs
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