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Kacey Dreamer reports on the resumption of a movement to tax financial transactions, with some high-profile supporters. In the past certain progressive organizations had a financial transaction tax as part of their overall strategy, but they did not have a campaign specifically designed around it. That’s the difference with the current Robin Hood Tax campaign, which has been imported from Europe. Some of the same groups, like National People’s Action, are involved in the Robin Hood Tax campaign, but it puts the financial transaction tax front and center.
The basic idea behind a financial transaction tax is to levy a small tax – less than one-half of 1% – on all financial transactions which go through an exchange or clearinghouse. This would be an almost unseen payment to the average investor, but with volumes on Wall Street, it would pile up money in a hurry. The organizers believe that an FTT could raise hundreds of billions of dollars, which could be channeled into job creation, anti-poverty and climate change programs. In addition, the cost would tend to discourage speculative behavior without social utility, like high-frequency trading. So in addition to the money an FTT would raise, it would limit some of the riskiest behavior in the financial system.
Actor Mark Ruffalo, musicians Tom Morello (Rage Against the Machine) and Chris Martin (Coldplay), economists Jeffrey Sachs, Joseph Stiglitz and Larry Mishel (EPI), and Bishop Desmond Tutu have endorsed the FTT as part of the US coalition. National Nurses United, one of the leading labor groups on this issue, has taken a role in this project as well. They have planned rallies in 15 US cities over the course of the week. The three aforementioned celebrities appear in the above video. One of the street actions includes encouraging people to draw Robin Hood masks on dollar bills.
The US actually invoked a “Robin Hood tax” from 1914 to 1966, a tax levied on the sale of every stock. Right now, forty countries have some version of an FTT in place, and it’s close to becoming reality across the Eurozone.
Given our current captured Congress, I don’t expect an FTT to emerge anytime soon. However, it’s important to prepare for exigencies during times of reform and change, and the FTT ought to be in the toolkit of long-term progressive reforms.
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“but they did not have a campaign specifically designed around it.”; did you forget this?
But, yeah, given that ‘banks own this place’, an FTT is as much a possibility as a strong Volcker Rule.
Well, the chances of putting it on the agenda improve if the dems can be convinced to let the Bush tax cuts lapse and then renegotiate a grand bargain from a position of strength. If people learn that we can Either raise the retirement age and cut SocSec benefits Or implement a modest tax on financial transactions that wouls raise enough revenue to cover ALL the expected shortfall in the SS system, it may be harder to argue for the first option.
Will never pass.
1) The taxes are passed on to the end user, i.e. pension funds, your 401ks, IRAs etc
2) Shrinks market liquidity resulting in poor price discovery resulting in trade execution at unintended prices
3) Results in regulatory arbitrage. i.e. trading moves offshore to Europe, Asia or South America.
4) Higher trading costs mean middle class is no longer able to participate in the public markets. Allows wealthy to benefit from higher market returns creating further discrepancy in wealth.
5) Reduction in trading volumes result in additional loss of jobs of not only traders but back office support.
ohh and its been tried before in Sweden and failed miserably.
This is a fantastic idea, which I have advocated for months.
Yes, it will shrink Liquidity, So what? You can argue that prices are more real, as they haven’t been driven up or down by phony “trades”.
The taxes are on Transactions, so they can”t be passed on to stable holdings like IRAs, which have few to no transactions.
They’ve been threatening to move trading for years, thet’re going nowhere.
The middle class finally have a fair shot in the market because the phony micro-second trading by computers that has manipulated values for years now, goes away. And finally those poor pricks on Wall Street that have to go out and find a real job—boo,hooo.
Oh, and by the way, a good test of whether this is a good thing is to measure the opposition to it from the crooks who recently nearly destroyed the world economy. The Jamie Dimons of the world HATE the very idea of it.
They will stop at nothing to strangle this in the crib.
That is why it won’t pass. Goldman Sachs, which has more money in derivatives than exists in the world, can’t possibly let this go through.
Hi, Everyone – I’m Back for a limited engagement:
Does anyone recall the “Jubilee 2000″ campaign?
How about “Make Poverty History”?
For a later time, does everyone know about the current sizzling summer read, “Fifty Shades of Grey”?
Referring to same, I wish to discuss at least fifty distinct shades of human-on-human exploitation — how it’s done, why we apparently can’t seem to rise above it, live without it, etc. Anyone game to this?
You clearly don;t have an understanding of how any of this works. You should be on the house banking committee.
Of course the tax can be passed through. Firms just increase the cost of trading commissions.
As far as liquidity, the IMF has put together a report on the negative effects on price discovery should a FTT be instituted.
Going nowhere? Are you serious? You don;t think U.S. firms have increased the level of trading they are doing outside of the U.S.?
Oh, so the people that understand “how it works” are doing a fine job, am I right?
And again, they can only charge more when trades are executed.
How thick are you?
Why can’t Schwab, Etrade, Goldman Sachs, JP Morgan etc etc raise the cost of the commissions they charge their clients to account for the tax?
Any shortfall in the SS system can be made up by removing the income cap (currently at $106,000) for SS payroll deductions.
Just as SS has nothing to do with the budget deficit, it can be self-sustaining indefinitely with this simple change.
The whole SS “debate” is a straw man to get the camel’s nose under the tent & then cut Medicare, Medicaid, Food Stamps/SNAP, and everything else. Simpson & Bowles should be forced to eat cans of cat food every time they open their spoiled brat mouths, and should be made to live in a cardboard box under a bridge through one winter in the northeast.
They can raise them all they want. My point is that the people effected by this are making multiple trades daily. If you make 10–20 trades a Year, you don’t much care.
This is the same as a sales and it is not passed on to the end user because the end user is paying the tax. The end user being the buyer in the Fin Trans. It is easy to exempt a certain number or value of trades in pension/40iK etc. funds.
The Europeans are considering the same tax and likely most of the other nations will as well.
Oh yeah? What happens when you want to take your money OUT of the IRA? You just lost 1% of everything you accumulated. And don’t forget that the money growing in that IRA often comes from things like dividends (taxed under the new plan), interest (uh, taxed), and capital gains distributions (say it with me – taxed).
This is a stealth tax that just lowered your returns in investments by at least 1%. It has other unintended consequences as well. Companies, cities and states have to set aside more money to fund their pension plans (the amount they have to set aside is based on expected future returns), thus placing a competing demand on cash flow (and taxpayers, for instance).
One percent sounds so small, but it adds up.
It’s a GREAT idea, and since forcing a vote on it would embarrass the republicans and blue dog democrats, with this preznint, it has about as much chance of coming to that vote, as did the effort by those progressive democrats in the House, to strip the health insurance robber barons of their exemption from anti-trust laws. Pelosi killed that in it’s crib and I don’t think she did it on her own hook.
As for any hit on small investors, just but a bottom-cap on it so that it applies to the fatcats.
“Simpson and Bowles should be forced to eat cans of cat food…”
Absolutely, and our criticism of George Bush for appointing them to the Catfood Commission, from which vantage point they could peddle bullshit about SS, should be unstinting.
1) The taxes are passed on to the end user, i.e. pension funds, your 401ks, IRAs etc
Tax incidence passes through to customers, employeesor owners depending on respective bargaining power. Let’s be serious, Vanguard WITH transaction fees will still be cheaper than most br<okers are today w/o transaction fees.
2) Shrinks market liquidity resulting in poor price discovery resulting in trade execution at unintended prices
Only if you think flash trading has anything to do with price discovery (which no reasonable person would). In fact, by pricing flash traders out of the market, it would make the market less of s sucker’s bet for everyone else.
3) Results in regulatory arbitrage. i.e. trading moves offshore to Europe, Asia or South Americaa
Good, the traders can send postcards when they get there. Don’t forget, US Govt taxes its citizens on worldwide income. Beyond that, the US runs a chronic capital surplus (the flip side of our trade deficit), good luck trading those funds outside the US.
4) Higher trading costs mean middle class is no longer able to participate in the public markets. Allows wealthy to benefit from higher market returns creating further discrepancy in wealth.
Ha, you realize the top 400 wealthiest families has more net wealth than the entire botom half of US families? Most Americans can only afford to bet at the equivalent of the $2 window, no one has has seriously argued that an FTT is regressive.
5) Reduction in trading volumes result in additional loss of jobs of not only traders but back office support.
ohh and its been tried before in Sweden and failed miserably.
The finance sector has far too large a share of GDP and corporate earnings. Transaction taxes are Pigouvian sin taxes, even if they don’t raise a penny in revenue, if those traders and back office support are forced to transition from the casino economy over to the real economy, it would clearly benefit society.
Finally, Sweden’s FTT failed for the same reason it could never win a war against Germany. There’s something to be said for economy of scale, the US is large enough that we can bomb Germany into the Bronze Age AND impose an FTT (though I’d recommend only doing one or the other at a time).
Actually I like where your head is at. A 1% (far higher than this proposed FTT, by anyway…) FTT with the funds going to increasing Social Security benefits would be a huge net winner for virtually 401k and IRA account holders.