Crash Tax: Reparations to the 99%
from Edward Fullbrook
With the continuing fallout from the Global Financial Collapse and the global upsurge of real democratic sentiments, support seems to be growing for a Tobin or financial transactions tax. Yesterday AlterNet stated the case for it as follows.
Wall Street caused the crash. It caused devastating unemployment. It exacerbated deficit problems in the United States, Greece, Ireland, Portugal, Spain and Italy. If the market hadn’t crashed, sustained higher tax revenues would have prevented these difficulties from intensifying.
…….
The crash tax is, essentially, a sales tax on financial transactions. The middle class pays sales tax on all the stuff it purchases. There should be no special exceptions. The 1 percent should be paying sales tax on the purchase of risky derivatives and on bets that derivatives will fail. This is equity. This is simple fairness.
A Crash Tax would not only reduce the kind of speculation that crashed the global economy, but would also raise revenue in a time of government deficits worldwide. The 0.1% tax proposed for European Union would raise an estimated $78 billion a year, and the miniscule 0.03% tax proposed in legislation introduced this month in the US Congress would raise an estimated $350 billion over a decade.
Supporters of the Crash Tax now include:
George Soros
Dean Baker
Ralph Nader
Steve Keen
Joseph Stiglitz
Bill Gates
Peter G. Peterson (billionaire)
John Whitehead (former Goldman Sachs chairman)
Paul Volcker (former chairman of the US Federal Reserve)
Paul Krugman
Archbishop ofCanterburyRowan Williams
Pontifical Council for Justice and Peace.
Archbishop Williams writes:
There is still a powerful sense around – fair or not – of a whole society paying for the errors and irresponsibility of bankers; of messages not getting through; of impatience with a return to “business as usual” represented by still soaring bonuses and little visible change in banking practices.
You can read more about the Crash Tax here: http://www.alternet.org/story/153065/crash_tax_wall_street_should_pay_reparations_to_the_99?page=entire
Imagin what we could do with the money if the Crash Tax wassame as VAT 22%
Great to see, Edward. Robin, you’ve almost taken the words out of my mouth. If public service is going to rely on tax rather than interest-free credit, why shouldn’t capital gains be subject to VAT?
unfortunately a Tobin Tax does NOT stop speculation — as I demonstrated in an article published in the ECONOMIC JOURNAL in1999 entitled “Will Grains of Sand in the Wheels of Finance stop Speculation When Boulders are Required?”. Moreoever Tobin, after reading my article, agrreed with me that the Tobin Tax will Not stop speculation.
The Tobin Tax is, of course, a cash cow for governments — but it tends to do some harm as it stops arbitrage between markets!!
Paul Davidson
Paul, for those who understand the mathematics, the INTEGRAL of effectively continuous computerised arbitrage via the internet IS speculation. It also dodges legal auditing of right to sell.
My reaction after following up Edward’s alternet link is that a piffling tax on traitors sends all the wrong messages. People deserve to be shot or at the very least stripped of their assets, locked up and given hard labour, if they have deliberately camauflaged bad debts with good and profited from selling these derivatives, other people’s jobs and their houses (foreclosed on when job loss or interest rate changing has prevented them from repaying mortgages, adding insult to injury). Stock exchange and bank accounting may be necessary evils, but they should be paid for as public service, not as a percentage of profits on massive speculative turnovers of at best dubious value. (Didn’t Keynes liken it to burying money in a hole the ground, to employ people digging it up again?)
“It is curious how common sense, wriggling for an escape from absurd conclusions, has been apt to reach a preference for WHOLELY “wasteful” forms of loan expenditure …”. Read the General Theory, ch.10.vi. A “Tobin tax”? Wasn’t Tobin the guy who reduced the Keynesian dynamic to a static IS/LM relationship? Let it be Paul’s boulders: 22% VAT.
The key players in the financial system have literally stolen the wealth of nations and should be held accountable by their victims. A Tobin tax is a tacit licence to go on stealing.