Hedge Fund Gamblers Earn the Same In One Hour As a Middle-Class Household Makes In Over 47 Years
Continued from previous page
The FST (also known as a financial transactions tax or the Robin Hood tax) is a modest set of taxes on Wall Street trading – e.g. 0.25% (1/4 of a percent) on a stock purchase or sale and 0.02% (1/50 of a percent) on the sale or purchase of a future, option, or credit default swap. These rates are proportional to the actual transaction costs in the industry.
An FST would raise over $100 billion per year in badly needed revenue or $1 trillion over the course of a decade.This is a substantial sum of revenue, which skims the fat off of a sector of the economy that can afford to pay it.
The beauty of this kind of tax is that it grabs the financial booty before it lands in the financiers’ pockets. You avoid all the lobbying over loopholes and trying to get back money that someone already has claimed as his or her own. You also avoid the entire argument about whether or not the person has really “earned” it.
By taxing financial speculation in real time, we reclaim some of the ungodly accumulation of speculative wealth in the financial sector. Everyone knows that the financial sector has grown too large for the good of our nation. Everyone knows that its size allows it to play fast and lose with our implicit guarantee of its bets. (Correction: everyone knows but Tim Geithner, who actually believes the financial sector should get even larger so it can provide more speculative services to emerging markets all over the world.) The financial speculation tax is the perfect way to put that money back to work for the common good.
Furthermore, it’s the very best way to make the financial sector pay us back for all the damage it has done to the economy. Before we succumb to financial amnesia we should recall that Wall Street, and it alone, went on a massive gambling spree that crashed the economy and killed 8 million jobs. To save the system from falling into another Great Depression we bailed them out and now they are again making record profits. Meanwhile, long-term unemployment remains at record highs and states are in enormous fiscal distress.
Every American not tied to Wall Street knows that the high-stakes financial gamblers should be paying us back. The speculation tax is the very best way to do it -- grab the money before they stash it in their offshore accounts.
We’re not alone.
Financial transaction taxes are high on the agenda of European nations that seem much less intimidated by their financial barons. The United Kingdom already has such a tax on stock and bond transactions, and there are no adverse effects on its financial center.
On March 8, a coalition of progressives succeeded in getting the European Parliament to endorse this Robin Hood tax by a vote of 529 to 127. This non-binding proposal if enacted would raise approximately $286 billion a year for the European Union. The G20 group of the leading industrial nations is considering such a tax, but the US and its billionaire bankers are fighting hard to keep it off the agenda.
Back in the USA an ad hoc collection of economists are mounting a petition drive to put the issue back on the agenda. It says in part:
The financial crisis has shown us the dangers of unregulated finance, and the link between the financial sector and society has been broken. It is time to fix this link and for the financial sector to give something back to society. …This money is urgently needed to raise revenue for global and domestic public goods such as health, education and water, and to tackle the challenge of climate change.
Needless to say, winning won’t come easy because Wall Street is determined to kill any and all efforts to siphon money away from its casinos. The joke is that when the big boys were on their knees two years ago begging for money, this tax easily could have been a condition for bailing them out. But in truth, the Obama administration is siding with Wall Street and has come up with every lame excuse for why it can’t work, even though it’s working just fine in England.
Clearly, we need our own Robin Hood movement like the one organized in Europe that delivered more than 500,000 petitions to the European Parliament. And that in turn requires we develop the will to fight Wall Street.
Each time I write about these issues, my editors worry that you, the readers, have given up -- that nobody believes it’s possible to fight Wall Street and win.
Well, I’m not giving up on you.
Les Leopold is the executive director of the Labor Institute and Public Health Institute in New York, and author of The Looting of America: How Wall Street's Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity—and What We Can Do About It (Chelsea Green, 2009).