Europe Takes the Lead in Drive to Tax Speculators
There are still places in the world where folks from across the political spectrum can have a rational discussion about fair taxation.
High-speed rail, universal health care, quality cheese. Let's face it -- the Europeans often leave us Yanks way behind. And now they appear on track again, with solid progress this week towards adopting an innovative proposal to pay for the costs of the global economic crisis.
On March 8, the European Parliament voted 360-299 in favor of introducing financial transactions taxes, tiny levies on trades of stocks, derivatives, currency, and other financial instruments. The proposal could generate an estimated $200 billion per year in revenue for European governments to channel into job creation and other urgent needs. At the same time, it would discourage the type of risky, short-term speculation that got us into this economic mess in the first place.
What's most astounding is that the tax proposal sailed through despite the European Parliament's strong right-wing majority. Yes, there are still places in the world where folks from across the political spectrum can have a rational discussion about fair taxation.
The vote came after more than a year of global advocacy by labor union, anti-poverty, environmental, and other citizens groups. On February 17, activists in 25 countries carried out a Global Day of Action. See this video and this map to get a sense of the breadth of this campaign, from Nepal to Mexico in the global South and from Canada to Japan in the North. German activists staged one of the most elaborate publicity stunts. They dressed up as glamorous Robin Hoods and Maid Marians to crash the Berlinale film festival, arriving in a white limousine and then parading down their own red carpet.
While the message seems to be getting through in Europe, U.S. activists have not had much luck. While not publicly offering much of an explanation, U.S. Treasury Secretary Timothy Geithner has reportedly consistently dismissed the idea at G-20 meetings. A WikiLeaks cable from 2009 revealed that then British Prime Minister Gordon Brown was deeply frustrated by Geithner's opposition.
This week's vote signaled that many key European leaders are no longer willing to let the Obama administration hold them back. The Parliament's resolution calls on the EU to adopt transactions taxes, regardless of whether the United States or other major economies take similar action.
On the bright side, the United States doesn't appear to be actively trying to block European progress. This is a pretty big deal, considering that President Barack Obama stacked his European embassies with former financial executives (e.g., former Citigroup Vice Chair Louis Susman in London and former Goldman Sachs executive Philip D. Murphy in Berlin) and the Wall Street lobby would no doubt love the administration's help in preventing what for them would be an unnerving precedent.
The campaign for Europe to pioneer financial transactions taxes is, however, far from over. The European Parliament has clout as a directly elected body, but it does not have binding authority over taxation matters. National governments will make the final decision, and while heavyweights Germany and France are strongly in favor, there are some problematic holdouts, namely Italy and the UK. The European Commission, the civil service for the EU, is also not yet convinced.
Nevertheless, according to Owen Tudor, Head of International Relations for the UK's Trade Union Confederation, the European Parliament vote broke a big logjam. One of the main obstacles, Tudor says, "has been the buck-passing of world leaders, who are always looking for someone else to make the first move, or for everyone else to agree before they will. Apart from the clear failure to understand what the word 'leader' actually means, this is almost always only an excuse for inaction, which lets the financial sector off the hook while public services are slashed, the poor get poorer and the world heats up."
More than 20 years after Europeans could zip along on bullet-speed trains, Americans are still stuck on bumpy railways or clogged freeways. The Obama administration recently announced plans to expand U.S. investment in high-speed rail. It's also high time for them to get on board the international campaign to tax the speculators, in part as a way to pay for things like transportation infrastructure. Otherwise, this could well be one more area where we'll be stuck in the slow lane for years to come.
© 2011 Institute for Policy Studies