Bridging The Fiscal Cliff: A Wall Street Sales Tax
Day after day, day after day,
We stuck, nor breath nor motion;
As idle as a painted ship
Upon a painted ocean.
Water, water, everywhere,
And all the boards did shrink;
Water, water, everywhere,
Nor any drop to drink.
– The Rhyme of the Ancient Mariner
According to the latest reactionary brainwash scheme turned corporate media narrative America has a “spending problem.” We spend too much on taking care of people (stop laughing rest of the developed world) and therefore we have to go on a severe diet of austerity to enrich Wall Street banksters restore fiscal sanity. Because if we do not rich people and their friends the global bond market will punish us with fire and brimstone – like vigilantes they will say “make my day” and years later relive their glory by cursing at an empty chair.
But the question arises when considering government deficits – aren’t there two sides to deficits? Is not another way to balance a budget to increase revenues?
The response from the reactionaries in Congress is no new revenues, period. Taxation is theft! You looting moochers! Stop spending taxpayer money, unless it’s for military contractors who donate to our campaigns! You’ll kill the economy with new taxes, actually with existing taxes, speaking of which how about another tax cut?
In short, while there are revenue sources everywhere, none can be used to balance the budget.
The more reasonable of the lot point out that ending the Bush tax cuts will not make up the shortfall so deep cuts are necessary regardless. While it is true that just restoring the Clinton-era tax levels for higher income earners will not be enough to balance the budget there is another revenue stream that would not only be fair but productive to tap into – Wall Street. It is time for a financial transaction tax.
A financial transaction tax has numerous benefits but let’s talk about the most relevant one. Revenue.
According to a report by Political Economy Research Institute of the University of Massachusetts a financial transaction tax would bring in roughly $350 billion in revenue annually. Enough revenue to maintain the massive defense budget, if that’s something you are into.
And since we are talking about Wall Street let me move past greed to fear to offer another benefit of taxing sales on Wall Street – financial stability.
James Tobin, a Nobel-Prize winning economist, suggested levying a tax on speculative activity in the global currency market. A tax, Tobin believed, would help curb dangerous speculation such as occurred in Mexico, East Asia, and Russia in the 1990s. By exacting a cost on speculative activity the incentive to destabilize markets/countries through quick flows of money would be reduced as longer term investment would become more lucrative by contrast.
Curbing dangerous speculation was also the motive for one of the first proponents of the financial transaction tax, John Maynard Keynes, who wrote:
Speculators may do no harm as bubbles on a steady stream of enterprise. But the situation is serious when enterprise becomes the bubble on a whirlpool of speculation…
The introduction of a substantial government transfer tax on all transactions might prove the most serviceable reform available, with a view to mitigating the predominance of speculation over enterprise in the United States.
Would the crash of 2008 have happened had there been a financial transaction tax on derivatives? Could a future financial crisis be averted by dampening speculative activity?
It is difficult to determine the positive effects of a financial transactions tax beyond revenue collection despite strong logic that it would reduce speculation – what is easy to determine is the lack of downside.
The Wall Street rejoinder to this tax proposal will surely be that it will hurt investment, and let me tell you right now why that is total bullshit – America once had a financial transactions tax.
Not only did America have a financial transactions tax, from 1914-1966, but the highest period of growth in American history occurred with it in place. If the tax hurt investment no one told the economy.
But putting aside any ancillary benefits, this is a tax that will collect needed revenues. If this revenue is not collected cuts to vital social programs will have to take place or be exacerbated. Social Security, Medicare, Medicaid, education assistance, anti-poverty programs – all on the chopping block without this revenue to make up the difference.
Budgets are about choices and priorities, they demonstrate our values. So what are our values? Should the poor suffer more, should we break our promises to seniors, or should speculators face a minor tax that may make them think twice about blowing bubbles?
The choice is up to you.