During an election campaign, candidates often talk about freebies, fee health care, fee higher education and the like, but how can we afford it and pay down the national debt, (Blog 6/30/16) a black hole that threatens the solvency of our nation? This season both Democratic candidates proposed a tax which could bring in much needed revenues, even provide a few luxuries without increasing our mushrooming deficit. The proposal is called a financial transaction tax (FTT) and the burden for paying it falls on Wall Street.
Unlike a sales tax, which has the greatest impact on the poor, the financial transaction tax is more progressive. Under a sales tax, a man or women who buys a loaf of bread for $1 and makes 100 dollars a week pays a higher per cent of his or her income or .01% for the product. A person who earns a $500 a week pays .002% for the same loaf of bread. Since the FTT would be applied to the buying and selling of stocks and other Wall street investment instruments, most who would pay the tax would be the more affluent among us and institutional investors.
How much money the new tax would increase the national coffers is the question. The Center for Economic and Policy Research estimates the increased amount would be around $130 billion dollars annually. The Tax Policy Center is more conservative, projecting an income of $75 billion. (“The Little Tax That Could, by Kevin Drum, Mother Jones, July/August, 2016, pg. 15) Proposals for the tax rate have been kept low, around.01% on bonds and 0.5% per $100 in stock trades. Rates any higher might drive investors to trade overseas.
Taxing more complicated investments, like derivatives, (Click) is complicated but not impossible. And there is an added plus to the tax. FTT will probably drive high-frequency traders out of business – those who cause markets to crash with abnormally high buy and sell orders. As writer Kevin Drum explains, each “individual trade usually earns a smaller size than the size of the tax.” (Ibid pg. 14.) Under FTT, high-frequency trading would be as foolish as selling leaf blowers in the desert.
Nobody likes taxes, but FTT seems fair, falls upon those most able to pay and could help solve some of our debt problems. Come November, as presidential candidates talk about our economy and improving our tax system, FTT should be a part of the discussion.
Courtesy of www.taxhelpattorney.com
