Tax The Speculators by Ralph Nader
Let's start with a fairness point. Why should you pay a 5 to 6 percent sales tax for buying the necessities of life, when tomorrow, some speculator on Wall Street can buy $100 million worth of Exxon derivatives and not pay one penny in sales tax? Let's further add a point of common sense. The basic premise of taxation should be to first tax what society likes the least or dislikes the most, before it taxes honest labor or human needs.
In that way, revenues can be raised at the same time as the taxes discourage those activities which are least valued, such as the most speculative stock market trades, pollution (a carbon tax), gambling, and the addictive industries that sicken or destroy health and amass large costs.
So, your member of Congress, who is grappling these days with gigantic deficits on the backs of your children at the same time as that deep recession and tax cuts reduce revenues and increase torrents of red ink, should be championing such transaction taxes.
Yet apart from a small number of legislators, most notably Congressman Peter Welch (Dem. VT) and Peter DeFazio (Dem. OR), the biggest revenue producer of all - a tax on stock derivative transactions - essentially bets on bets - and other mystifying gambles by casino capitalism - is at best corridor talk on Capitol Hill.
There are differing estimates of how much such Wall Street transaction taxes can raise each year. A transaction tax would, however, certainly raise enough to make the Wall Street crooks and gamblers pay for their own Washington bailout. Lets scan some figures economists put forth.
The most discussed and popular one is a simple sales tax on currency trades across borders. Called the Tobin Tax after its originator, the late James Tobin, a Nobel laureate economist at Yale University, 10 to 25 cents per hundred dollars of the huge amounts of dollars traded each day across bordered would produce from $100 to $300 billion per year.
There are scores of civic, labor, environmental, development, poverty and law groups all over the world pressing for such laws in their countries. (see tobintaxcall.free.fr).
According the University of Massachusetts economist, Robert Pollin, various kinds of securities-trading taxes are on the books in about forty countries, including Japan, the UK and Brazil.
Pollin writes in the current issue of the estimable Boston Review: "A small tax on all financial-market transactions, comparable to a sales tax, would raise the costs on short-term speculative trading while having negligible effect on people who trade infrequently. It would thus discourage speculation and channel funds toward productive investment." He adds that after the 1987 stock market crash, securities-trading taxes "or similar measures" were endorsed by then Senate Minority Leader Bob Dole and even the first President Bush. Professor Pollin estimates that a one-half of one percent tax would raise about $350 billion a year. That seems conservative. The Wall Street Journal once mentioned about $500 trillion in derivatives trades alone in 2008-the most speculative of transactions. A one tenth of one percent tax would raise $500 billion dollars a year, assuming that level of trading.
Economist Dean Baker says a "modest financial transactions tax would be enough to "finance a 10% across-the-board reduction in the income tax on labor.
The stock transaction tax goes back a long way. A version helped fund the Civil War and the imperial Spanish-American War. The famous British economist, John Maynard Keynes, extolled in 1936 a securities transaction tax as having the effect of "mitigating the predominance of speculation over enterprise." The U.S. had some kind of transaction tax from 1914 to 1966.
The corporate history scholar (read his excellent book, Unequal Protection) Thom Hartmann, turned three-hour-a-day talk-show-host on Air America (airamerica.com/thomvision), had discussed the long evolution of what he calls a "securities turnover excise tax" to "tamp down toxic speculation, while encouraging healthy investment."
So, why don't we have such a mega-revenue generator and lighten the income tax load on today and tomorrow's American worker? (It was one of the most popular ideas I campaigned on last year. People got it.) Because American workers need to learn about this proposed tax policy and ram it through Congress. Tell your Senators and Representatives-no ifs, ands or buts. Otherwise, Wall Street will keep rampaging over people's pensions and mutual fund savings, destabilize their jobs and hand them the bailout bill, as is occurring now.
A few minutes spent lobbying members of Congress by millions of Americans (call, write or e-mail, visit or picket) will produce one big Change for the better. Contact your member of Congress. The current financial mess makes this the right time for action.
Ralph Nader is a consumer advocate, lawyer, and author. His most recent book is The Seventeen Traditions.
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7 comments:
I am an independent, issue-based voter who tends to lean liberal and progressive, but the idea of a securities transaction tax is horrible.
Such a tax would remove liquidity from the markets. It would not only harm short-term traders, but it would harm anyone who are involve in the market. It would reduce long-term 401K returns. It would reduce liquidity for long-term investors who would have to deal with larger spreads and inferior prices. It would open the market to manipulation with the lack of liquidity. It would put market makers and traders out of work who often operate on very thin profit margins.
Such a tax punishes the wrong people. DeFazio's proposed tax punishes people on *main street*, not wall street. It punishes people who had nothing to do with the current financial crisis. The vast majority of investors and traders have nothing to do with the current crisis.
It would also amount to triple taxation. Investors are already taxed on capital gains, and then have to pay brokerage and SEC fees on top of that.
If you're going to tax, then at least do it by increasing the capital gains tax rate. Taxing securities transactions is a horrible, horrible, very short-sighted idea. To see progressives pushing such a short-sighted idea is disappointing to say the least.
Yngvai (Malmsteen spells it differently),
I am not a "progressive", per se, nor do I fit into any other tidy little box. I follow no specific ideologies other than one's dictated by common sense.
Common sense told me many years ago that investing in human misery and slavery was wrong, immoral and lazy and that most stock investment seemed to use (abuse) this exact formula. Therefore, a good worker should not invest in or profit from other workers' oppression. Common sense.
Most "Main Streeters" disagree and Main Street America invested heavily in the machinery of war and oppression to fuel their own retirements.
This well-marketed idea was shared by most in the middle and ruling classes (regardless of which fake political party they belonged to). We have even spent several decades teaching our children how to get rich buying stock in school rather than teaching them about how to vote or balance their checkbooks.
This stock ownership throughout the beginning of "globalization" killed many a brown child and put many a white child through college. Legal? Yes. Ethical? No.
Trying to defend our collectively terrible behavior by explaining the ways of the market to me is a moot point at best. Main Street now needs to cut its losses and move forward by investing in and supporting local business. At least, in that scenario, one can have a good sense of how one's money is being spent and how the company creates profit.
For example, if you invested heavily in IT in India or China, you had to feign ignorance that you were living off the backs of oppressed workers and were directly responsible for the poisoning of their environment and the enslavement of their children. If you pretended that you were unaware of these things, you were lying to no-one but yourself.
Supporting businesses that observe some modicum of labor and environmental standards should be a mandatory part of anyone's "portfolio". Well, today it is not and I am for taxing to death anyone who has used this "nouveau slavery" to benefit themselves, regardless of their supposed need. if you live off food stamps and live in a rental apartment with a black and white TV you are already rich by the standards of half the people alive. You have absolutely no excuse (if you live in America) to be profiting from the oppression of our brothers and sisters overseas.
Those you oppress so that your 401K's will (would) yield a better return are human beings too and we are collectively evil for having allowed any accumulation of wealth that caused us to turn a blind eye to this fact.
It would seem that now the chickens have come home to roost. Our "air economy" is in serious disrepair. The world has grown tired of carrying us and our imperialist ambitions around on its back and has shrugged us off.
What now? Continue to print federal money we do not have to offset these huge corporate losses?
OR
See our demise for what it is, put our shoulders to the grindstone and penalize those wealthy few who continue to seek profit from human bondage?
Matt,
Your assessment of how the market works is WAY off base.
First, you are proposing a solution that punishes ALL investors for the actions of some that you deem as unethical. That, my friend, is also unethical. That's like punishing an entire classroom because 20% of the kids did something wrong.
It is not just to propose an unethical action to counter another unethical action....i.e. 2 wrongs don't make a right.
You have also committed the fallacy of the hasty generalization by painting all companies as making money off "human misery." Certainly, there are companies that do this, but not all companies do this, and thus it would be unjust to punish the investors who invest in companies that don't do this.
You say we have spent years teaching people in school how to get rich off buying stock. I'm not sure what school you went to but I was never taught such things in the 3 universities that I attended, and not in high school or grade school either.
You also don't understand how the market works. A company's stock is NOT the company. They are actually quite different. Other than a company's IPO or when a company sells additional shares into the public float, you are NOT giving money to the company when you buy it's stock. You are buying the stock off someone else who happens to own it.
A company's stock price is simply a reflection of its supply and demand. If it's a good company, more people want to own the stock, demand goes up, and the stock increases in value. However, if you buy this stock, you aren't giving any money to the company. So your notion that you are somehow "living off the backs of oppressed workers" is simply not true, because the money you get from an appreciating stock doesn't come from the company.
Finally, you talk about "penalizing the wealthy few who continue to seek profit from human bondage." Most people who trade stock are NOT wealthy, and as I said before, they are not profiting from human bondage. You are proposing a punishment (a transaction tax) for a large segment people who have nothing to do with what you're talking about.
You talk "common sense" but your arguments don't hold water upon close inspection.
Yngvai,
You and I have severe disagreement about how the market works. That is probably not reconcilable.
We have all seen the experts and pundits proclaim their opinions about all matters economic. In the end, those of us who did not trust these Wall Street experts are, with our painfully simple understanding of the market, the "last men standing".
We didn't drink the KoolAid and so, don't have a 401K to cry about. We're not destroyed. I am not dependent on an air economy to survive. I trade in labor and tangible assets that I have earned as do my workers and we eek out a living in this manner. Those who took the other path are screwed.
Sadly, you're right, many of those people who were talked into "investing" their money in mutual funds were workers. That doesn't change the fact that money, post Gold standard, at its most basic level, still represents LABOR. When you make a profit, but have expended no labor of your own to make it, you are stealing the labor of some other person somewhere else.
The layers of complication you add to your understanding of this air economy allows you to pretend that its not stealing but that smacks of self-delusion to me. I know that my thought process on this is not a popular one but I think it is more truthful.
Money doesn't just grow magically. If you have a hundred dollars and a year later it has grown a few percentage points due to inflation or interest, that's somewhat understandable. BUT, if your hundred dollars became $135 dollars and you don't think that someone somewhere else in the world is being paid $5 a day to create that profit for you, you're only lying to yourself.
Matt,
Again, your assessment reeks more of ideology rather than evidence or fact.
I am an evidence-based person. You have not provided any hard evidence to support your position....only ideology. You have not provided any facts that refute what I said. Instead you've resorted to vague generalizations.
And in response to this comment:
"When you make a profit, but have expended no labor of your own to make it, you are stealing the labor of some other person somewhere else."
Really? So if I invest in a biotech company that finds a cure for cancer, and the value of that company's stock increases because of the increased demand, where exactly have I stolen money from the labor of someone else?
Your logic is very twisted to say the least.
Yngvai, your last missive suggests that you have contributed something other than conjecture or opinion yourself. I looked through your statemnts and, with all due respect, I don't see that at all.
You have an opinion about how the market works. There are pundits and experts and economists and wall street traders and farmers who might see its operation from a different perspective but yours is the one that is correct?
A fact is that major corporations used the market to mask the fact that nothing was actually backing up our currency and the currency will, as a result, fall.
A fact is that all the experts who understand this all too well are the very cause of our economic failure so why would any thinking person trust anyone to explain how the "mysterious" market works?
You ask if a bio-tech firm that you invest in cures cancer, was your initial investment stealing labor from workers?
I would say that the answer would certainly be yes IF the company selling its cancer medicines did so with so much added profit that desperately ill people were denied the benefits of the breakthrough.
Is that stealing labor, per se? No, I guess it could more properly be called "stealing life". I'm not sure that I see a real big difference in the level of evil we should ascribe to such an activity. ;-)
To see a very direct example, just look at the cost of AIDS drugs. The corporations that produce them seem to find one excuse after another to keep the prices ridiculously high claiming that they have not made enough return on their investment yet. How many people worldwide have been denied antiretrovirals they need to stay alive because they were not wealthy enough to buy them?
Is this not, in the end, all done simply to benefit stockholders? Millions have died during the AIDS pandemic in Africa, all to enrich stockholders. That's a fact for you.
If your hypothetical company is fattening up its CEOs and stockholders while less wealthy people in need are dying, I WOULD certainly call your investment in this company evil and immoral act.
My point about theft of labor was just to say that money ultimately is worth what is expended to earn it. If you expend nothing and you earn money, someone, somewhere else will have to suffer to make that "profit" for you. In my delusional world, that is a fact.
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I looked through your statemnts and, with all due respect, I don't see that at all.
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Then please provide evidence contradicting my statements and show why they are false. And please not that general statements based on ideology are not the same as hard evidence contradicting my statements.
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You have an opinion about how the market works.
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No, these are facts on how the market works. I find it interesting that someone who has obviously never had any experience in the market seems to certainly profess to know a lot about it.
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There are pundits and experts and economists and wall street traders and farmers who might see its operation from a different perspective but yours is the one that is correct?
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These others you refer to are irrelevant. The fact of the matter is I made a number of statements. If what I said was false, then please provide evidence showing why they are false. Again, you don't seem to understand the difference between ideology and evidence.
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A fact is that major corporations used the market to mask the fact that nothing was actually backing up our currency and the currency will, as a result, fall.
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This is a red herring and irrelevant to the discussion at hand.
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A fact is that all the experts who understand this all too well are the very cause of our economic failure so why would any thinking person trust anyone to explain how the "mysterious" market works?
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There's nothing mysterious as to how the market works. It is basic supply and demand. The only one making a mystery out of it is you.
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I would say that the answer would certainly be yes IF the company selling its cancer medicines did so with so much added profit that desperately ill people were denied the benefits of the breakthrough.
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But once again, you confuse a company and its stock price. They are not the same thing. Stock price is purely set by supply and demand in the market. If I profit off a rising stock, I certainly am not profiting off of what you say I'm profiting off of. I'm simply profiting off the increased demand for the stock.
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No, I guess it could more properly be called "stealing life".
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Making money off of the increased demand for a stock is not stealing anything.
If I bought Action Comics #1 years and years ago, and then sold it at a higher price due to the increased demand, the only profit I've made is off the appreciated value of the comic because of the increased demand (and obviously low supply).
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To see a very direct example, just look at the cost of AIDS drugs. The corporations that produce them seem to find one excuse after another to keep the prices ridiculously high claiming that they have not made enough return on their investment yet.
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Evidence please. Even so, this is irrelevant to the company's stock price.
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Is this not, in the end, all done simply to benefit stockholders?
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Hardly. Stockholders are usually the first to get screwed if something goes wrong with a company. In the end, it's all done to benefit the owners of the company itself. Again, you seem to have a problem separating a company and its stock.
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Millions have died during the AIDS pandemic in Africa, all to enrich stockholders. That's a fact for you.
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If this was a fact, you would have evidence to support it. Merely asserting something doesn't make it so.
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If your hypothetical company is fattening up its CEOs and stockholders while less wealthy people in need are dying, I WOULD certainly call your investment in this company evil and immoral act.
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If, if, if.....
What if this was not the case? Would you then still justify a trader tax?
"If" what you say was true, it still does not justify a trader tax which is what you've been trying to justify all along. In your imaginary world, you are happy to punish the innocent just so that you can get at the guilty.
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that money ultimately is worth what is expended to earn it.
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No, value is set by supply and demand.
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If you expend nothing and you earn money, someone, somewhere else will have to suffer to make that "profit" for you.
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This is complete bullshit. No one has suffered in my Action Comics example. No one suffers when the value of something goes up simply because the demand for it goes up (and supply stays constant or decreases).
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In my delusional world, that is a fact.
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At least you admit your world is delusional.
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