It’s called a financial speculation tax.
You may have already heard of it. It’s also called the financial transaction tax (FTT), a Robin Hood Tax, or a Tobin tax, after the Nobel Prize-winning economist who suggested it.
The proposal goes like this: for every transaction of stocks, bonds, foreign currency bets, or the famed Wall Street “derivatives,” the trader pays 0.25 percent of the amount in question in tax. Sort of like a sales tax for Wall Street, a quarter of a penny on every dollar. While this will translate as a small ripple to the market, the fee would generate billions of dollars needed for infrastructure, education, health care, and our social safety net.
How much, you may ask? With the zillions of financial transactions zipping around every day, the fee could take $150 billion off of the deficit every year. Given that Democrats – Democrats, not Republicans –just put $400 billion in Medicare on the chopping block, it’s far past time for a speculation tax to get some serious attention.
In addition to the revenue, the financial speculation tax provides a disincentive to the very activities that lead to the current economic mess – the short term, high yield, risky investments. If Wall Street recognizes gets more value out of longer-term financial products, they’ll get back to their intended function – serving the rest of the economy instead of pilfering it. Paul Krugman describes the thinking of fellow economist James Tobin, the brains behind the idea:
Tobin argued that currency speculation — money moving internationally to bet on fluctuations in exchange rates — was having a disruptive effect on the world economy. To reduce these disruptions, he called for a small tax on every exchange of currencies.
Such a tax would be a trivial expense for people engaged in foreign trade or long-term investment; but it would be a major disincentive for people trying to make a fast buck (or euro, or yen) by outguessing the markets over the course of a few days or weeks. It would, as Tobin said, “throw some sand in the well-greased wheels” of speculation.
Opponents of the FTT, including our current Secretary of the Treasury Tim Geithner, argue that it would have an adverse effect on the economy. A letter from a group of business organizations including the
U.S. Chamber of Commerce and the NFIB stated that an FTT would “impede the efficiency of markets” and “distort capital flow.” Many of these groups are also working against clean energy reform, earned paid sick days, worker protections, and, conveniently, Wall Street reform, so we take their warning cries with a grain of salt. Besides, letting Wall Street run wild and sell lies to Americans tax free did much more to “distort capital flow” than a quarter of a penny fee ever could.
Not convinced? Here is an absurdly long list (PDF) of economists, businessmen and women, world leaders, and other luminaries who support a financial speculation tax, from German Chancellor Angela Merkel to super wealthy Dallas Mavericks owner Mark Cuban.
On November 3, 2011, the AFL-CIO will join National Nurses United and Occupy Wall Street participants in a nationwide day of action calling for a financial speculation tax.
Sign our petition calling for Congress to take up the FTT, and use the hashtag #TaxWallStreet to follow @WorkingAmerica as we participate in the call to lay the foundation for a better economy.
Reposted from Working America's Main Street Blog