“Tax Wall Street,” read a simple, homemade placard high above the crowd of thousands of members of unions, community groups and Occupy activists protesting outside the mid-October convention of bankers and futures traders in downtown Chicago. Curtis Smith, president of the local affiliate of National People’s Action, a network of community organizations focused on the mortgage crisis and financial industry reform, seized a microphone to detail the demand.
Among other measures, Smith proposed a tax on financial transactions, including the sale of stock, bonds and derivatives. The tax would make Wall Street better serve the Main Street economy, and it would generate tens – even several hundreds – of billions of dollars annually in much-needed revenue for worthy projects. Governments would collect the tax on financial transactions most prone to harmful speculation, and wealthy individuals and financial institutions would mainly pay. That’s why NPA and British campaigners call it the “Robin Hood tax.”
In the weeks before the Chicago protests, the European Commission had proposed a financial transaction tax for Europe by 2014 – reversing its earlier rejection of an FTT. Conservative leaders of both France and Germany – Nicolas Sarkozy and Angela Merkel – vowed to press adoption of the tax at the G20 leaders meeting in France in early November, despite opposition from the conservative British government and the Obama administration. On November 3, international union delegations demonstrated for an FTT outside the G20 conference.
In Washington on the same day, National Nurses United protested with other unions and allies, urging Congress to “Heal America/Tax Wall Street,” and labor-community rallies around the country urged political leaders to enact the tax. And in Congress, one day earlier, Sen. Tom Harkin (D‑Iowa) and Rep. Peter DeFazio (D‑Ore.) re-introduced their proposal for a very modest FTT.
The idea of imposing a very small tax on some sales of financial products is not new; British economist John Maynard Keynes proposed a stock speculation tax in the 1930s. In recent years, the FTT has picked up support from some prominent business leaders (including Warren Buffett and Bill Gates) and many economists, from Nobel Prize winners Joseph Stiglitz and Paul Krugman to the 1,000 economists from 53 nations who signed a letter last April saying an FTT was “technically feasible” and “morally right.” The International Monetary Fund identifies 24 countries that currently have an FTT, most prominently a long-standing tax on stock sales in Britain, home to one of the world’s largest financial markets.
FTT advocates think the financial trading business has grown too big, too speculative and too parasitically destructive of the real economy. Center for Economic and Policy Research (CEPR) co-director Dean Baker, a pioneer FTT proponent, notes that investment banking and trading quintupled as a share of the U.S. economy from the 1970s to the last decade. Banking is like trucking, Baker says – an intermediate good. An efficient economy minimizes the trucking or financial activity required to produce goods and services.
Critics say an FTT would distort financial markets, would be hard to collect and, unless enacted globally, would drive business out of taxed countries. Ideally, all countries would cooperate, but countries can act individually. London’s stock market has managed to pay its tax and thrive. Experts have also developed sophisticated designs to minimize harmful distortions.
A broad-based FTT (0.5 percent on stocks and options, or about 50 cents per $100 trade) could yield roughly $170 billion in federal revenue annually, according to a study by CEPR and the University of Massachusetts. Oxfam, a leading advocate, says the money should be used for international development. Other proponents suggest deficit reduction, job creation, economic stabilization, global warming prevention and other causes.
Republicans in this Congress surely will block any FTT proposal, even if President Obama reverses his current position to support the tax (as he once did), but European momentum may eventually push the United States to act. “At a minimum it appears a group of G20 countries are going to move forward with financial transaction taxes, along with the European Commission,” says AFL-CIO Policy Director Damon Silvers. “The U.S. should be part of this global effort so that President Obama is clearly with the global 99% and not the Wall Street 1%.”
David Moberg, a senior editor of In These Times, has been on the staff of the magazine since it began publishing in 1976. Before joining In These Times, he completed his work for a Ph.D. in anthropology at the University of Chicago and worked for Newsweek. He has received fellowships from the John D. and Catherine T. MacArthur Foundation and the Nation Institute for research on the new global economy.