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When Will Wall Street Pay Its Share? Why We Have to Tax Financial Transactions

The day of the sequester was the same as any other for Wall Street: Billions of dollars in profits were made off of trillions of dollars in financial transactions.

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Even the Obama administration has been convinced to come out against the tax in the United States. And they’re pressuring Europeans to water down their version by insulating American banks. What’s the logic driving this opposition?

Some have argued that, historically, these taxes have been ineffective because of widespread evasion. But they’re cherry-picking a few badly designed examples, such as Sweden’s lemon of a tax from nearly 30 years ago. This is like saying cars don’t work because you bought a Datsun in the ’70s.

Many countries have implemented such taxes effectively. The United Kingdom, for example, manages to raise more than $5 billion per year on a 0.5 percent tax on stock trades alone.

Another common argument is that the tax will be passed on to mom-and-pop investors. The just-introduced U.S. legislation addresses these concerns by providing tax credits for contributions to typical middle-class investment accounts, including 401(k)s. Investment funds would still be taxed on their trades, but this could encourage longer-term productive investment instead of the short-term speculation that adds little to no value to the real economy.

If the Obama administration is serious about fair taxation and a smart approach to the deficit, it should change its position. Rather than trying to derail Europe’s efforts, it should cooperate with Europe to ensure that the tax there is effectively enforced. And the administration should build support in Congress, including among Republicans.

Yes, we’ve all heard House Speaker John Boehner’s line that the debate over revenue raising is over. We also remember former President George H.W. Bush’s line, “Read my lips, no new taxes,” and how quickly his lips starting saying something else.

For tea partyers, wouldn’t a tax on Wall Street, the beneficiaries of the bailout they so reviled, be less objectionable than most other revenue options?

Sequestration is a septic wound, self-inflicted by lawmakers who can’t agree on anything. Here, at last, we have a smart idea with widespread support — Americans and Europeans, populists and economists, progressives and conservatives.

After Friday’s dumb budget cuts, a little smart policymaking would be nice for a change.


Read more from  Katrina vanden Heuvel’s archive or follow her on Twitter.



Katrina vanden Heuvel is editor of The Nation.
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