By GREGORY N. HEIRES
Now that the U.S. Congress has raised taxes on the wealthy for the first time in two decades, right-wing politicians are stepping up the cry for spending cuts, falsely claiming that our government can’t afford entitlements like Medicare and Social Security.
The issue, though, is not affordability. The money is there. The real question, of course, is who controls it.
The debate over the deficit reflects differing views over the role of government and ultimately the structure of our society, whether we want to support protections of the welfare state or shred our safety net and force individuals to fend for themselves under savage capitalism. Conservatives want to destroy New Deal and Great Society programs—and sabotage Obamacare.
Unfortunately, the deficit hysteria of the Right is so strong and effective that the mainstream media and many of the pundits who set the terms of the debate in Washington are also hung up on the affordability issue. Their ideological blinders, for instance, lead them to push for cuts in Social Security even though that program doesn’t contribute directly to the federal deficit or debt.
Progressives need to fight back and refuse to bow to this deficit hysteria and vicious assault on the welfare state. They should seize upon the opening provided by U.S. Congress’ decision to raise the tax rate for the wealthy and promote other revenue streams. And they need only to look across the Atlantic Ocean to find hope.
In December, the European Parliament voted for a financial transaction tax as the region confronts massive deficits and soaring unemployment. This makes common sense since speculators and bankers have the deep pockets to contribute their fair share to government programs and they bear a responsibility for wrecking the economy.
Eleven European countries are now considering adopting a financial transaction tax. The London Stock Exchange already has a .5 percent tax on financial transactions, though it has several exceptions.
In the United States, the Economic Policy Institute, the Institute for Policy Studies, National Nurses United, the Center on Budget and Policy Priorities, George Soros, Warren Buffet, U.S. Rep. Keith Ellison, D-Minn., and U.S. Sen. Bernie Sanders, I-Vt., are among those leading the call for a transaction tax, which would provide billions of dollars annually in revenue.
“In its essentials, the idea of a financial market transaction tax is simple,” said economist Robert Pollin, co-director, Political Economy Research Institute at the University of Massachusetts-Amherst. “It would mean that financial market traders would pay a small fee to the government every time they purchased any financial market instrument, including all stock, bond, options, futures, and swap trades. This would be the equivalent of sales taxes that Americans have long paid every time they buy an automobile, shirt, baseball glove, airline ticket, or pack of chewing gum, eat at a restaurant, or have their hair cut.”
The average sales tax rate in the United States that consumers pay on almost all goods and services is 9.6 percent, according to the National Nurses Union. Yet, absurdly, J.P. Morgan, Goldman Sachs, Morgan Stanley, and the other financial giants on Wall Street pay no sales tax on the thousands, even tens of thousands of trades, they carry out every second.
In December, as the debate over the “fiscal cliff”—impending automatic tax increases and spending that the last-minute deal between Congress and Obama administration averted–heated up, the 185,000-member National Nurses Union rallied in 20 cities across the country to call for a transaction tax, also known as the Robin Hood Tax.
“Wall Street’s agenda, of more punishing cuts for working people, and more handouts for the banks, who are the main beneficiaries of policies that put debt payments ahead of protecting seniors and working families, was roundly rejected by voters in November,” nurses union President Deborah Burger said. “Let’s not hand Wall Street the victory they lost at the polls. Instead, it is time to hold the bankers and speculators accountable, and levy a small tax on their reckless behavior to help rebuild the economy they did so much to wreck.”
Ellison has sponsored the Inclusive Prosperity Act. By imposing a 50-cent-tax on every $100 of stock trades and a lesser amount on other financial transactions, the legislation would bring in as much as $350 billion every year.
Sanders’ proposed legislation would establish a speculation fee of .03 percent on the sale of credit default swaps, derivatives, stocks, options and futures. It would raise $350 billion over 10 years.
A study by the Economic Policy Institute says a modest tax on the buying and selling of stocks and other financial products could bring in an estimated $150 billion a year while dampening the speculation and rapid turnover of stocks that contribute to the instability of the economy. That financial instability, of course, was one of the causes of the 2008 economic blowup.
So, in addition to providing a new, substantial revenue stream, a transaction tax would hopefully curb the recklessness of financial traders and speculators. Tens of millions of dollars in computerized trades sometimes occur within minutes, and that can cause market turbulence.
The average holding period of financial transactions has plummeted from four years to 22 seconds, bringing instability to the market and taking $635 billion out of the economy, according to Wallace Turbeville, a senior fellow at Demos and former vice president of Goldman Sachs. Proponents like Turbeville say that even a small transaction tax should contribute to the stability of the market by making hedge funds, investment banks and speculators more cautious.
“The American public provided hundreds of billions to bailout Wall Street during the global fiscal crisis yet bore the brunt of the crisis with lost jobs and reduced household wealth,” said Ellison, when he introduced his legislation last year.
“This is a phenomenally wealthy nation, yet our tax and regulatory system allowed the financial titans to amass great riches while impoverishing the systems that enable inclusive prosperity,” Ellison said. “A financial transaction tax protects our financial markets from speculation and provides the revenue needed to invest in the education, health and communities of the American people.”
www.thenewcrossroads. Posted January 7, 2013
