What do the Pope, Bob Dole, and the Archbishop of Canterbury have in common? They all support some version of a proposal to tax financial speculation.
How about we try a tax idea that curbs unproductive speculation on Wall Street and raises money to pay for the governmental services?
That is exactly what the Financial Transaction Tax (FTT) does. It is a very tiny tax on the sale of stocks and other investment instruments.
Some version of the FTT has been endorsed by Bill Gates, Warren Buffet, John Bogle (founder of the Vanguard Group), the Archbishop of Canterbury, and the Pope. Even Bob Dole and President Bush the Elder endorsed such a tax after the crash of 1987.
So who’s not with the Pope on this one? Well, there appears to be the usual bunch that thinks that if we are to have taxes at all they should be paid by the 99% instead of the 1%.
Then we have the folks who are making fortunes hovering over computers and trading stocks every ten minutes or so in order to pocket the margins and quickly unload the stock again. These “investors” suggest that if the FTT is imposed they will take their business to the Cayman Islands. Sounds like a party to me, but is it real?
The fact is that these folks will have few places that they realistically can go. Twenty-nine countries already have a tax like this. Last weekend President Sarkosy of France followed the lead of Chancellor Merkel of Germany in promising to impose an FTT in their securities markets.
These developments should eliminate the main argument against the FTT – that it cannot be collected. In fact, the Joint Tax Committee (JTC) of the US Congress recently concluded that the FTT could bring in as much as $350 billion over ten years. Sounds like it can be collected to me.
The bill that the JTC scored was introduced last month into the Congress by Senator Tom Harkin and Representative Peter DeFazio. Their tax rate amounts to .3 cents on every $100 transaction.
This idea is not new. Beginning in 1914 the U.S. levied a 0.02% tax on all sales or transfers of stock. In 1932, Congress more than doubled the tax to help financial recovery and job creation during the Great Depression. The tax was abolished in 1966.
Sounds to me as though it was time we brought this back to help with job creation during the Great Recession.
Bill Daley is the Federal Issues Policy Director at The Alliance for a Just Society.