This Tiny Tax Could Help Bring America Out of Debt — But Nobody is Talking About It

If I told you there was a tiny tax that could be applied that only a few people would pay, which would potentially raise billions of dollars annually, would you be interested? It’s not a new idea actually and it is already in place — it’s just not being properly implemented.

Since 1905, New York has placed a tax on Wall Street transactions which currently raises about $16,000,000,000 annually. It does not apply to checking or savings accounts, but solely on the buying and selling of shares that are traded in the millions every day on the New York Stock Exchange (NYSE). Over the decades the rate of taxation has gone up and down, but here’s the shocker — every year since 1981, New York has collected the tax and promptly returned it to the traders. Yes, New York takes the tax and gives it right back.

Some have argued that this is a bad idea — that it doesn’t discourage speculation and creates market volatility which is the opposite of some of the intended effects. But what if we applied it in a proper, common sense way nationwide and actually put the money into the national coffers instead of giving it right back like New York currently does?

It is an idea which has been put forth in both Congressional and Senate legislation a number of times, most recently this past February when Democratic Senator Tom Harkin (D-Iowa) and US Rep. Peter DeFazio (D-Ore.) submitted a bill that would impose a 0.03% tax on financial transactions, and potentially raise over $350 billion annually. As mentioned before, some have claimed it would place undue burden on Wall Street and wouldn’t curb speculation, but almost all are in agreement that it would bring in revenue. In fact, some finance industry professionals submitted a letter in support of it in which they said the following:

Dear G20 and European leaders,

As individuals with first-hand knowledge and significant experience in the financial industry, we urge you to introduce small financial transaction taxes (FTTs). These taxes will rebalance financial markets away from a short-term trading mentality that has contributed to instability in our financial markets. They also have the potential to raise significant revenue.

In the last few decades, financial market activity has increased tremendously, with the value of transactions now seventy times greater than the size of the real global economy. The primary role of financial markets is to raise investment, allocate resources efficiently, and mitigate risk. However, much of today’s financial activity does not contribute to these goals. Computer-driven, high frequency trading, for example, allocates resources on the basis of algorithms designed to turn very short-term profits and have been shown to drain liquidity in stressed markets when it is needed most.

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.

Concerns have been raised that FTTs could damage growth. But a growing body of evidence suggests that by reducing volatility and raising much needed revenue, the overall effect would be positive. Critics have also wrongly associated trading volume with efficiency-enhancing liquidity and failed to sufficiently take into account market resilience and trust that are undermined in a world where very short-term trading dominates the financial system. As many notable economists have observed, a modest transaction tax will actually improve the functioning of markets.

FTTs have a proven track record. Numerous countries, including those with deep and fast-growing markets, such as the UK, South Africa, Hong Kong, Singapore, Switzerland, and India, currently have FTTs on particular asset classes that raise billions of dollars per year. New FTTs, whether agreed by the G20, EU, or by individual countries, offer a real opportunity to help restore the financial sector to its proper role, while raising massive revenues for people in urgent need at home and in the world’s poorest countries. We believe this is an opportunity that should not be missed.

To me, the idea of raising revenue based off a tax that takes a tiny fraction of stock and derivative trades from the same institutions we had to bail out after they took us into the last recession just makes sense. Not to mention that some of them, like Bank of America, repaid our kindness by lying to homeowners and finding ways to not renegotiate mortgages. This is an idea which, combined with removing corporate subsides and reducing defense spending, could very well balance the budget and reduce the debt.

So if it makes sense, could help balance the budget and reduce our debt, why hasn’t it happened? Well, when you have a government made up of hundreds of elected officials who don’t care about coming together and doing what’s best for the country, this is what happens. Good ideas fall by the wayside while corruption and gridlock takes center stage. And they wonder why they’re far less popular than head lice?

Comments

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  • Suzie

    Could it be that because the bill was submitted by politicians who are DEMOCRATS that is has been ignored? We need more majority Democrats to get things done! Next election, hopefully?

    • Suzie

      oops, “it”, not is.

    • Barb Gabhart

      oh PLEASE it has NOTHING whatsoever to do with which party introduced the damn thing. NO, i am NOT a democrat, nor am i a republican. I do not vote party lines, i vote FOR people, not their party. In the end, they are all bought and paid for by corporations. Its a shame that so many people decide that a certain political party is/are responsible for everything and then fight it out based on that stupid assumption. The very thing that is tearing this country apart is bipartisan maneuvers. Its time to look at the reality of the situation, EVERY SINGLE one of these politicians is out for themselves, regardless of their affiliation with a political group. Government has become so corrupt by their own greed and want of power, that they will do anything for anyone at the risk of us, the people. We need to hold them accountable for their actions, or lack of, and throw them all out. Maybe then we could start getting a better group of people with real ETHICS to look out for us. Everyone is so tired of their antics, but is unwilling to actually make the government accountable. A government should be scared of its people, not the other way around. Otherwise, this is what we end up with……a body of corrupt peoples who are running our country into the ground and its people along with it.

  • jalbertini

    Why so tiny? I pay 7% on a Big Mac. Tax 3% would eliminate a lot of speculative trading which would be a good thing!!!

    • daclhill

      It would also pay for pay for the health care for all, social security, education for all. Sounds good to me. The brokers charge a fee to by and sell, why not. It needs to be taxed.

    • disqus_6AeSbMRBY2

      It’s not even 3%; it’s .03%, less than half a penny for every dollar.

      • Gary Smith

        Far less than one half of a penny. On a $50,000 stock transaction, the tax would be 5 cents. 5 cents! How could this possibly be construed as “an undue burden” on the entities that brought the entire world’s economy to its knees with their reckless and corrupt greed?

      • nana

        50,000 x .03% is $15.00. Still o.k. with me.

      • Gary Smith

        Curse you math!

      • jalbertini

        That is what some are proposing: 1/2 cent on a dollar. Considering what is paid in commissions to buy and sell this wouldn’t be onerous but might reduce speculative very short term (five minute) trades. It would raise many billions in tax receipts though!

  • disqus_6AeSbMRBY2

    We’re talking about three one hundredths of ONE PERCENT. Less than half of one penny for every dollar. And you would think they were being asked for blood. I can’t imagine being so greedy…..

    • Michelle Rhoades

      3 cents on every $100. That’s highway robbery!

  • Lynne

    So just a quick note, the ads on this page seem incongruous with your progressive belief….right smack in the middle is a picture of Mitch McConnell and a phone number, saying to call him and “defund Obamacare.” Why do you have an ad like this on your site? Is this the new low Republicans are sinking to, buying ads on sites like this?

    • Obediah

      What ads? Apparently, someone is using a browser other than Chrome (with the free AdBlock Plus extension) — for whatever reason, I can’t imagine. There are NO ads on the page I’m reading.

      • BlooSoxx

        No ads on my page either, and I’m using Firefox in an unmodified installation.

      • Ann

        Adblock doesn’t work if you are using the Facebook app on iOS and you click a link.

    • Blake Seitz

      I have ads too and they are usually promoting things that the views of this page ould normally be against. I’m using Safari.

    • Grazel

      The ads are placed by the hosting service for this blog (likely tumblr or blogger) and likely tied to keywords so while political aren’t always of the same political bent as the page. These aren’t handpicked by the blog themselves but pushed out by their ad provider.

      • Gary Smith

        Correct. Site owners have very little/no control over what ads appear on their website, other than basic “no ads for ‘adult’ or NSFW services/products’ strictures.

      • xnerd

        I use adblocker, and never see any adds anymore.
        very nice. (adblocker is an browser extension)

  • Jouv`ert

    THIS IS AN INTERESTING ARTICLE. IF TRUE, IMAGINE HOW THESE MONIES COULD BE USED TO BUILD UP THE INNER CITY AND ITS EDUCATIONAL SYSTEM. WHICH IN TURN WILL DEVELOP A MORE ROBUST AND SOUND GROUP OF INDIVIDUALS WHO COULD NOT ONLY CONTRIBUTE TO THEIR FAMILIES, THEMSELVES, THEIR COMMUNITIES BUT ALSO, OUR COUNTRY ECONOMICALLY. IF ONLY IT COULD BE AGREED TO BY BOTH THE DEMOCRATS/REPUBLICANS. PEACE.

    • xnerd

      We wont have to worry about republicans much longer.
      We outnumber them 8 to 1. People are leaving the republican ranks like rats from a sinking ship.

      2014 is going to go down in history as the year of the people

      • Suzie

        I sure hope you are right, xnerd!

  • Pipercat

    This occurred to me recently. To really make an impact, it should be applied as a fee, applied to seller as well as the buyer and not limited to just equities. It really is something to look at closely.

  • g

    Would fuck up fracking so very wealthy people would be pissed. So they spend billions of dollars annually convincing stupid people to vote for people acting stupid who won’t take away any of their institutional advantages.

  • louis

    people, if we are going to continue to wait for these bankers and politicians to step up and do the right thing, well be waiting for eternity. republicans will never ever step up, to be honest democrats arent much better. Anyone that believes our 2 party system is fine, is flat out delusional or uneducated. Democrats are just as corrupt as republicans. to say they arent all milking from the same tit, is just dumb.

  • Miguel

    It makes entirely too much sense. Therefore, it’ll never happen.

  • Matthew Reece

    Taxation is armed robbery, slavery, trespassing, communicating threats, and conspiracy to commit the aforementioned crimes. Consequentialist arguments about paying national debts cannot excuse this evil.

    • William Cooper

      Really, I thought it was a vital part of being a citizen. Oh thats right I am in the real world and your in a libertarian nut house…

      • Matthew Reece

        Citizenship is slavery. When statists take part of what you rightfully earn, your bodily ownership is being infringed upon.

      • LateNightLarry

        Then why don’t you just give up the benefits of citizenship, and move to a country where there are no taxes, no criminal statutes, or any other stuff that libertarian nutcases don’t want… like Somalia… There is no functioning government there, so you don’t have to worry about taxes… just paying the protection money to your local warlord and his friends.

      • AphroditeBell

        We are not entitled to anything in this world, therefor we truly own nothing. That is the problem with the entirety of the world, no matter who we are or where we come from, we believe we are entitled.

  • Of course it will be ignored. As long as the GOP can gerrymander, there is little hope of actually taxing their buddies. Y’all didn’t know this already?

  • oicur0t

    Taxing trade, either at retail, or other levels is done all the time, Nothing wrong with this.

  • regina

    Tax churches!!!!

  • Diane Henry

    This is well intentioned for sure. I think that Tom Harkin has proved himself throughout his career. The problems I see at this point are 1) The do less than nothing congress, as in more namely the house….. (I think the namesake needs work at this point but, I digress.) and 2) Harkin is retiring at the end of the term. Now, assuming that Bruce Braley makes the successful leap from the house to the senate (seems likely given the terrain in Iowa at this point) he can always bring it up in the next session and simply dedicate it to Harkin. However, that is a huge leap of faith for a freshman senator (assuming) to do something like that so quick. In other words, control of the senate for democrats and other cosponsors would be needed. Either way, I hate being the pessimist in the room but, as the old saying goes, and especially with this congress: Common sense is not so common.

  • Black-White-Grey

    0.03% is still too high. A penny per $ 100 is appropriate.

    NY gives it right back because if they kept it the stock exchange would move to NJ overnight where the tax does not exist. Especially considering the amount of money involved.

  • Marty Cox

    This woulds like another bright theory like “truck Down economics” to me!
    ahahahahah

  • Roland Rogayan

    I’m gonna copy paste this important news in my timeline, Roland Rogayan, Facebook account. I surmise many people are visiting my account without actually liking even one of my shares of timely issues and beautiful and awesome photos.

  • disappointment

    Why does every new “idea” come in the form of another tax? I make around 38k a year and getting taxed at almost a 1/4? If I have any hope of retiring or investing in my future how about we don’t add anymore taxes for the “inner cities”.

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