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Tax the Wall Street Casino
Angry about the greedy financial speculation that wrecked the economy? Got a deficit headache? Anxious about where the money will come from for long overdue investments in energy independence that will create good jobs in the new economy? 
How do we spell relief? Try F.S.T., which stands for Financial Speculation Tax.
A financial speculation tax is a modest levy on financial transactions such as the purchase and sale of stocks, bonds, derivatives, and swaps. England and Taiwan have such taxes on securities that encourage productive investment and discourage reckless trading behavior.
Leaders in the U.S. Congress have introduced a proposal to collect a penny on every four dollars of financial transactions, a fraction of what people pay in broker fees. This FST would exempt retirement funds and the first $100,000 of individual investment transactions. So it would target the fast-buck flippers, the same financial gamblers who crashed the economy through reckless speculation.
The financial speculation tax would raise an estimated $177 billion a year, which makes it the potentially biggest revenue raiser on the table right now.
The deficit hawks should be thrilled about a financial speculation tax. Last week, President Obama issued a directive to federal agencies to propose ways to cut their budgets by 5 percent. The Sustainable Defense Task Force identified $960 billion over ten years in wasteful military spending that could be eliminated without compromising national security. Combine that military savings with a financial speculation tax and we have key components to a new budget and spending plan.
As President Obama heads to Toronto on June 26th for the Summit of the G-20 leaders, he's going to find lots of other presidents asking about the F.S.T. German Chancellor Angela Merkel and French President Nicolas Sarkozy have renewed calls for a financial speculation tax.
President Obama will argue in support of his bank tax proposal, which will raise an estimated $9 billion a year. The G-20 leaders may also debate a proposal from the International Monetary Fund to institute a "financial activities tax" on profits and employee compensation of all financial institutions. We estimate such a tax would raise $28 billion a year in the U.S.
Yet given our national revenue challenges, why wouldn't we consider the biggest potential revenue raiser, a financial speculation tax? According to a new report that I co-authored, Taxing the Wall Street Casino a financial speculation tax will raise 20 times as much as President Obama's proposed bank levy and six times as much as the IMF's proposed Financial Activities Tax.
A financial speculation tax would have tremendous benefits. It would discourage the short-term investment outlook that lay at the heart of the financial crisis. And it would encourage a healthier marketplace in real goods and services. "We have lost the distinction between real investment in the real economy and short-term speculation," said John Fullerton, a former JP Morgan Managing Director. "A financial transactions tax should, at the margin, shift investment horizons out to longer holding periods by making high turnover trading strategies marginally less profitable."
Other leaders from business and finance have stepped up to talk about the value of a financial speculation tax. Wealth for the Common Good has initiated a campaign of business leaders and investors who support the tax. John Bogle, the founder of Vanguard Mutual Fund, supports the tax as "a way to slow the rampant speculation that has created such havoc in our financial markets, but also for its revenue-raising potential in this time of staggering government deficits."
Obviously what stands in the way of implementing such a common sense proposal is the powerful banking and finance lobby, the same interest group that tried to block and is now trying to water down financial reform. But while Wall Street lobby groups have formidable political and economic clout, a growing global "people power" campaign behind financial speculation taxes has a good chance of winning.
16 Comments so far
Show AllThis is one of those BLAA BLAA BLAA articles.
No matter what
they do
we are
S C R E W E D
I support the FST. If Wall Street doesn't pay it, we will.
The money will come out of the brokerage firms' profits, so they will never let Congress pass the bill.
I think 0.25% is too low and should be at least 0.50%.
Ok, this is a good start, but how about a progressive tax on wealth.
How much does Bill Gates make every year? One, two, three billion. How about taxing his wealth/income at about 90 percent?
He would not miss a penny.
Tax the rich until their are no more rich.
I think the FST idea is great. Except what investor can resist 177 billion setting in a fund? You lost me with your comment about "compromising finacial security".It already is compromised. We are in debt up to our arses (learned this word from the Brits). We pay way too much for our insecurity.
I am not secure or safe, or saved by the military... Scaped goats (and the men who stare at them).
If I am a gambler in Vegas I have to pay taxes on my winnings - how is this any different.
Very true - the solution is for gambling industry to set up a group called the NGA National Gamblers Association and hire a Charlton Heston like stiff to be the front, Jack Nicholson. Then send Congress court approved bribes (campaign finance contributions).
Who the hell taught Obama to negotiate? He starts out conceding half of what would make a bill and law good before the negotiation even starts...then when the voting is done the new law achieves maybe 20% of what's needed.
Ahhh yes. Congress is going to tax wall street into better behavior. Lmao. My don't these deck chairs look better in their new spot?
The average broker takes 4% on a foo-foo mutual fund. 0.25% is way too cheap. 0.5% isn't bad, but taking it to a full 1% wouldn't scare off most long-term investors, just the gamblers who drive the market way up and way down.
Hi Chuck --
My name is Johans. I enjoyed reading your article, and the fundamental point you're making is well intentioned. One area for improvement is with regard to this:
"So it would target the fast-buck flippers, the same financial gamblers who crashed the economy through reckless speculation."
It's beyond the scope of a comment of this nature to educate you about how an economy grows and prospers and why it stops growing and stops prospering.
Suffice it to say that your fundamental point, which is laudable, is heavily diluted by basing the premise of your argument on the role speculators played in causing the multi-trillion dollar U.S. economy to recede for several quarters.
Kind regards,
Johans
"Angry about the greedy financial speculation that wrecked the economy?"
Correct me if I'm wrong here but, from my understanding, it wasn't the speculators that wrecked the economy. It was 1. small banks selling sub-prime loans because of easy chinese money, 2. larger banks packaging those loans into bonds with a mix of sub-prime and prime loans, 3. Moody's and the like, rating those bonds triple A(super safe), 4. again larger banks marketing those false triple A bonds to unsuspecting customers. In a nut shell, easy credit, lack of investigating/research and some immoral behavior. I think this guy is going after the wrong people.
"larger banks packaging those loans into bonds with a mix of sub-prime and prime loans"
These are the CDO's collateralized debt obligations
"again larger banks marketing those false triple A bonds to unsuspecting customers"
And, knowing fully well that many of those CDO's would crash as mortgagees increasingly defaulted, bought "insurance policies" called Credit Default Swaps, CDS's, from companies like AIG which ultimately could not pay off the CDS's.
Taxpayers to the rescue!! Including taxpayers who lost their homes. Yeah, baby! Ain't capitalism great? The markets will correct all.
"This FST would exempt retirement funds and the first $100,000 of individual investment transactions. "
This seems like too much trouble. Also, I agree that 0.25% is too low. Let's make it 1% and let them know their lucky we don't make it 5%. We could just institute national sales taxes that applied to stocks, bonds, etc. and real estate, like the state sales taxes that get the poor on goods and services. That would be fair.
This transaction tax makes sense. Even Republicans are always saying we should tax what we want less of.
By the way, here in WA state there will hopefully be on the ballot this fall, an initiative to lower taxes on the middle class and start a small income tax on those making over $200,000. Property taxes will be reduced by 20% and the Businesss and Occupation tax will be eliminated for small businesses.
Now, both the property and B&O taxes must be paid even if the citizen has NO income, if they lose their job, even if their business loses money; so they are innately unfair and regressive.
The new income tax revenues will be dedicated to education and the Basic Health plan, both of which have been cut deeply.
Bill Gates Sr has been very openly supportive of this initiative 1098. Signatures are being gathered now....
My tax here in California on goods runs 9.25%. If these speculations are so lucrative, what's wrong with a similar amount? Speculative profits can be a windfall for the government trying to balance its budget.