If Bankers Don't Want Regulation, Why Not Tax Them Instead?
Robin Hood popped up all across America last week. A bunch of green-suited Merry Men protested in front of Wall Street bank branches in 15 cities.
Another felt-hatted group demonstrated in Washington D.C. during J.P. Morgan Chase CEO Jamie Dimon’s testimony about why his bank shouldn’t submit to regulation even after flushing $2 billion down the toilet. The biggest band of Robin Hoods appeared on dollar bills — a pointy hat drawn on George’s head and the words “Robin Hood tax” written below.
The American Robin Hoods are seeking economic justice. They want Congress to resurrect the financial transactions tax. This is the Robin Hood tax, a tiny levy on the sale of stuff like stocks, bonds, derivatives, futures and credit default swaps. It packs two benefits in one tax. It would give the government cash to offset the cost of the Wall Street-caused recession. And it would suppress the high-risk, high-speed trading that caused the crash. Britain, home of Robin Hood, already charges a form of it. Ten European Union countries plan to institute it. America needs it.
It’s not new. The United States collected the tax for half of the 20th Century. During the Great Depression, Congress doubled it to help pay for recovery. It’s not novel. Twenty-nine countries charge it now, including Brazil, India, South Korea, Hong Kong, Singapore and Switzerland. It’s the opposite of a God-forsaken-market-killer. While it was levied in the United States from 1914 to 1966, the nation enjoyed the world’s greatest economic expansion.
And it’s a great idea. Lawmakers and pundits are screaming and crying about “the financial cliff” the country faces in December when tax rates will automatically rise and massive budget cuts automatically begin. The Robin Hood tax would help solve that problem.
The impending cuts include $321 billion slashed over a decade from programs that help everyday working people including cancer research, farm inspectors and federal grants to cities for law enforcement. The Bipartisan Policy Center estimates that the spending cuts would reduce the gross domestic product next year by half a percentage point – which in real life terms means more unemployment, more foreclosures, more poverty.
That doesn’t have to happen. All it takes is resuming the Robin Hood tax. Legislation already introduced in Congress to charge .03 percent on trades would raise $350 billion over a decade. That’s enough to preserve all of those programs for working people.
The nation charges sales taxes on cars and toys and soap. But it charges nothing on the sale of stocks and bonds and risky derivatives.
There’s no reason credit default swap sales should get a pass and dodge taxation. Especially when there’s another reason that taxing them is a great idea. The tiny tax, 50 cents on every $100 traded, would discourage the Wall Street gambling that continues to threaten the stability of the U.S. economy.
Two years ago, Lake Research found 80 percent of those polled favored a Robin Hood Tax that would suppress risk. Here’s the statement that 8 in 10 supported:
“We need to rein in the greedy, reckless behavior of the big banks on Wall Street that cost millions of jobs and led to huge bailouts on our dime. This tax will put a limit on the casino culture of Wall Street that provides no real value and only exists to line the banker’s pockets. This reform will strengthen our financial system to help prevent another crisis and reduce the deficit.”
It’s also the reason leaders in France and Germany are pushing the tax for Europe. They believe it will cool overheated computer-driven, high-frequency financial speculation, promote long-term productive investment and provide money to rescue unstable banks in places like Spain without requiring workers to bail them out. Not all 27 countries support the tax, but France and Germany plan to move ahead with the first eight others that do, including Italy, Spain, Greece, Poland and Austria.
In addition to those world leaders, another suit-and-tie crowd joined the green-outfitted Robin Hood tax supporters last week. On Thursday, 52 economists, hedge fund managers, current and former heads of European banks, and former high level executives of Wall Street banks sent a letter to the leaders of the world’s largest economies asking them to institute a financial transaction tax. They said the tax would serve the world economy:
“Financial transaction taxes of a small fraction of a percent on each trade, such as those proposed by the European Commission and backed by a number of G20 countries, would moderate the incentives for such short-term speculation while having a negligible impact on long-term investment.”
Wall Street banks, bailed out by the Bush administration in 2008, continued to speculate anyway and failed to engage in the self-discipline necessary to safeguard against future crashes. The $2 billion loss J.P. Morgan reported last month and Moody’s downgrading the credit scores of 15 major banks last week testify to the institutions’ risk taking.
Even after losing all that money, J.P. Morgan CEO Jamie Dimon insisted banks don’t need regulation. Let’s go with the tax then, Jamie. Because workers sure can’t take another crash.
Support the Robin Hood tax. Draw a green Robin Hood hat on George on a dollar bill. Write Robin Hood tax below it and sign it. Photograph yourself with your Robin Hood dollar bill under your chin and post it on Facebook. Tweet it. Circulate the Robin Hood greenback and the Robin Hood tax cause.