Robin Hood Tax to Reduce Wall Street Greed
February 28, 2013
A tax on Wall Street speculators responsible for the worst recession since the 1930s was proposed today in Congress. Sen. Bernie Sanders cosponsored a bill that Sen. Tom Harkin introduced in the Senate. A companion measure by Rep. Peter DeFazio was filed in the House. “Both the economic crisis and the deficit crisis are a direct result of the greed, recklessness, and illegal behavior on Wall Street,” said Sanders. “This bill will reduce gambling on Wall Street, encourage the financial sector to invest in the job-creating productive economy, and significantly reduce the deficit. At a time when we have a record-breaking national debt, the very least we can do is demand that Wall Street pay its fair share in taxes.”
The tax would generate an estimated $352 billion over 10 years, according to the Congress’s Joint Tax Committee.
Ordinary, long-term investors would not be affected by the measure, which would place a small financial transactions tax (three cents per $100 in value) on non-consumer financial trades in stocks, bonds and other debts after an initial public offering. For example, there would be no tax on a loan to a company, but if the financial institution traded the debt, the trade would be subject to the tax. The fee would also cover all derivative contracts, options, puts, forward contracts, swaps and other complex instruments at their actual cost.
By setting the tax rate so low, the measure would not impact the market’s traditional role supporting economic activity. It would, however, reduce certain speculative activities like high-speed computer arbitrage trading. A speculation fee could help to shift Wall Street away from short-term trading. Given the very high volume of financial trading, it will raise considerable funds, badly needed to protect Medicare, Medicaid, and other important federal investments and for reducing deficits.
Earlier this year, a group of 11 European governments agreed to implement a financial transaction tax. The action allows for a tax of 10 basis points on stocks and one basis point on derivatives on financial transactions by the following countries: Germany, France, Italy, Spain, Belgium, Austria, Greece, Portugal, Slovakia, Slovenia, and Estonia.