Tax the Speculators

Let's start with a fairness point. Why should you pay a 5 to 6 percent
sales tax for buying the necessities of life, when tomorrow, some
speculator on Wall Street can buy $100 million worth of Exxon
derivatives and not pay one penny in sales tax? Let's
further add a point of common sense. The basic premise of taxation
should be to first tax what society likes the least or dislikes the
most, before it taxes honest labor or human needs.

In that way, revenues can be raised at the same time as the taxes
discourage those activities which are least valued, such as the most
speculative stock market trades, pollution (a carbon tax), gambling,
and the addictive industries that sicken or destroy health and amass
large costs.

So, your member of Congress, who is grappling these days with gigantic
deficits on the backs of your children at the same time as that deep
recession and tax cuts reduce revenues and increase torrents of red
ink, should be championing such transaction taxes.

Yet apart from a small number of legislators, most notably Congressman
Peter Welch (Dem. VT) and Peter DeFazio (Dem. OR), the biggest revenue
producer of all-a tax on stock derivative transactions-essentially bets
on bets-and other mystifying gambles by casino capitalism-is at best
corridor talk on Capitol Hill.

There are differing estimates of how much such Wall Street transaction
taxes can raise each year. A transaction tax would, however, certainly
raise enough to make the Wall Street crooks and gamblers pay for their
own Washington bailout. Lets scan some figures economists put forth.

The most discussed and popular one is a simple sales tax on currency
trades across borders. Called the Tobin Tax after its originator, the
late James Tobin, a Nobel laureate economist at Yale University, 10 to
25 cents per hundred dollars of the huge amounts of dollars traded each
day across bordered would produce from $100 to $300 billion per year.

There are scores of civic, labor, environmental, development, poverty
and law groups all over the world pressing for such laws in their
countries. (see tobintaxcall.free.fr).

According the University of Massachusetts economist, Robert Pollin,
various kinds of securities-trading taxes are on the books in about
forty countries, including Japan, the UK and Brazil.

Pollin writes in the current issue of the estimable Boston Review: "A
small tax on all financial-market transactions, comparable to a sales
tax, would raise the costs on short-term speculative trading while
having negligible effect on people who trade infrequently. It would
thus discourage speculation and channel funds toward productive
investment."
He adds that after the 1987 stock market crash, securities-trading
taxes "or similar measures" were endorsed by then Senate Minority
Leader Bob Dole and even the first President Bush. Professor Pollin
estimates that a one-half of one percent tax would raise about $350
billion a year. That seems conservative. The Wall Street Journal once
mentioned about $500 trillion in derivatives trades alone in 2008-the
most speculative of transactions. A one tenth of one percent tax would
raise $500 billion dollars a year, assuming that level of trading.

Economist Dean Baker says a "modest financial transactions tax would be
enough to "finance a 10% across-the-board reduction in the income tax
on labor.

The stock transaction tax goes back a long way. A version helped fund
the Civil War and the imperial Spanish-American War. The famous British
economist, John Maynard Keynes, extolled in 1936 a securities
transaction tax as having the effect of "mitigating the predominance of
speculation over enterprise." The U.S. had some kind of transaction tax
from 1914 to 1966.

The corporate history scholar (read his excellent book, Unequal
Protection) Thom Hartmann, turned three-hour-a-day talk-show-host on
Air America (airamerica.com/thomvision),
had discussed the long evolution of what he calls a "securities
turnover excise tax" to "tamp down toxic speculation, while encouraging
healthy investment."

So, why don't we have such a mega-revenue generator and lighten the
income tax load on today and tomorrow's American worker? (It was one of
the most popular ideas I campaigned on last year. People got it.)
Because American workers need to learn about this proposed tax policy
and ram it through Congress. Tell your Senators and Representatives-no
ifs, ands or buts. Otherwise, Wall Street will keep rampaging over
people's pensions and mutual fund savings, destabilize their jobs and
hand them the bailout bill, as is occurring now.

A few minutes spent lobbying members of Congress by millions of
Americans (call, write or e-mail, visit or picket) will produce one big
Change for the better. Contact your member of Congress. The current
financial mess makes this the right time for action.