The turmoil continues today, with investors continuing to flee to short-term Treasury bills (which promise virtually no profit so you can see how the panic continues) and continuing division on the Paulson bailout for bankers (Nancy Pelosi says bravely, "We are not taking ownership of this," meaning Republicans will have to vote for the deal also for it to pass…which makes me ask Pelosi, "it’s either bad and you sink or its good and you pass it, whatever the consequences"…oh, I forgot, that would mean having courage).
But, here’s something to chew on. A couple of years ago, when I was involved in a little political race of my own, I latched on to this idea: a tiny transactions tax on stock sales. It would be so miniscule that the small investors would never feel it, say, 0.25 percent of the sale. But, for the big traders, it would bring in some significant revenue–say, to pay for national health care.
Why not? These traders benefit from government protections, not the least of which is a regulatory system (oh, there I go using that "regulation" word, which now seems to be back in vogue) that prevents, in theory, fraud and crazy speculation (ok, so that doesn’t always work out well). Plus, such a tax might also exercise some restraint, perhaps modest, on the wild and crazy big trades made on rumors and the thirst for a quick buck.
But, the main point is shared responsibility. You live in this society and, so, you make a contribution. And that contribution is relatively modest and relatively painless.
And, if taxpayer money is being used, in whatever way, to float the boats of these morons who caused the leaks in the first place, the resources to plug the leaks should come out of their pockets.
This would be a good time to implement the idea. Peter DeFazio (D-OR), a reliable progressive, is floating the idea. Here is his letter to his colleagues:
September 23, 2008
Dear Colleague:
The Bush Administration is asking Congress to authorize the U.S Mint
printing presses to crank out $700 billion to cover the illiquid assets
of Wall Street. This will sink our current record budget deficit to
levels never before imagined.
The $700 billion is to protect Wall Street investors, therefore the same
Wall Street investors should pay for this infusion of taxpayer money.
The easiest method to raise the $700 billion from Wall Street is a
securities transfer tax, a tax that has a negligible impact on the
average investor, and provides a disincentive to short-term traders.
This transfer tax would be on the sale and purchase of stock and more
exotic transactions such as credit default swaps, options, and futures.
A quarter percent (0.25%) tax on financial transactions could raise
approximately $150 billion a year.
There is considerable precedent for this. The United States had a
similar tax from 1914 to 1966. The Revenue Act of 1914 levied 7a 0.2%
tax on all sales or transfers of stock. In 1932, Congress more than
doubled than tax to help plug the holes from the Great Depression. In
1987, Speaker of the House Jim Wright offered his support for a
financial transaction tax. And today the UK has a modest financial
transaction tax of 0.25 percent, a penny on every $4 invested.
In the past, economists such as Larry Summers, John Maynard Keynes and
Nobel prize winners Joseph Stiglitz and James Tobin have supported
financial transactions taxes.
This tax could be easily implemented as the SEC currently implements a
very small tax per transaction to cover its costs. All Congress needs to
do is raise the rate by 0.25% and designate the new income to the
general treasury to pay for the $700 billion.
Let’s get it done.