As Spitzer says:
This one is not so new; it has been around for a long time, supported by a wide range of economists, including Nobel laureate James Tobin, as well as advocates, including Ralph Nader in the Washington Post this weekend, and elected officials: a tax on financial transactions. It will give us gobs of revenue. It will fall on a sector that has generated enormous and unwarranted profits for a very few, who at the same time have benefited from huge bailouts and regulatory help and largely escaped any responsibility for their central role in creating the financial cataclysm that we are still struggling with.
Here is the idea: A tax of less than half a percent on every $100 of stock sales or sales of other financial instruments including bonds, derivatives, and options. The tax could raise anywhere from $170 billion to $350 billion per year depending how it was applied. Extend that over 10 years, and we are raising almost what the White House and Republicans agree needs to be raised in order to accomplish the objectives of a grand bargain.
The exact amount is open for debate; Spitzer says 1/2 of a percent per $100 of trade value. Others have said a flat 1% or $.10 per trade. The amount raised would be highly significant in each case. The key would be to set the tax at a low enough rate that small investors would hardly notice, but make it high enough so that high-frequency program traders on Wall Street would think twice about the speculative casino they have created. In other words, impose a tax that compels Wall Street to contribute more and take less, and at the same time encourage actual investing, and with longer-term outlooks.
Right, but don't hold your breath. The investor class and the politicians they control are not into doing the right thing, they are into money and power. For them, the current system works well.The application of this concept to the financial sector could solve our need for revenue, bring some sanity back into the financial sector, and give us a way to raise the revenue we need to run the government in a fiscally responsible way. Maybe this is the old idea that we need folks in D.C. to pay attention to again.