The fiscal problems of the United States are largely due to the fact that Wall Street pays no taxes. While working families pay 7% or more in sales tax for the necessities of life, Wall Street speculators pay no tax on their share of a yearly turnover of over $5 quadrillion (5,000 trillion dollars) in stocks, bonds and derivatives. A 1% tax on this turnover, equally divided between the federal and state governments, largely solves the budget deficit at all levels of government. It also discourages the most dangerous forms of speculation, especially derivatives speculation, and helps to level the playing field between financial services – which are now in effect subsidized because they are not taxed – and the tangible, physical production of manufactured goods on which our economic survival depends.
A small federal tax on securities transfer was in effect until the Johnson administration. In New York State, a small transfer tax remains on the books, but the $20 to $30 billion yearly proceeds are being remitted to the zombie banks as a result of successful Wall Street extortion. A Wall Street Sales Tax has been endorsed by a growing number of public figures, economists, journalists and legislators, with several bills already having been introduced into the US Congress.
In December, 2012, 11 member states of the European Union, including Germany and France, endorsed the European Union financial transaction tax (EU FTT), which will charge 0.1% on the sale of stocks and bonds, and 0.01% on derivatives. Opposition to this tax has been centered in Wall Street and the city of London.
We demand a 1% tax paid by all US sellers of stocks, corporate bonds and derivatives, all of which must be traded and reported on open exchanges.
The proceeds of this tax should be split between the federal and state governments to fully fund social obligations, public payrolls and pensions.
Household-level investment must be protected with a $1 million yearly exemption. The 1% Wall Street Sales Tax is not a "wealth tax" but a sales tax directed at professional financial speculators.
How will this tax affect the little guy or my 401k?
Households with less than $1 million in financial transactions per year will be entirely exempt from the tax, therefore the vast majority of savers with modest brokerage accounts, 401(k) plans, IRAs, Keogh plans, etc. — about 98-99% of the American people — will never be affected by the tax.
Is this a new idea?
No. The United States collected a similar tax on stocks between 1914 and 1966. Today, at least 29 countries, including Australia, Brazil, China, France, Hong Kong, Hungary, India, Ireland, Italy, Russia, South Korea, Switzerland, Taiwan and the United Kingdom, currently use some sort of financial transaction tax (FTT) and the idea is being considered in about a dozen others. The European Union, representing 28 member states, is also seriously debating the implementation of such a tax. Far more modest than what we're advocating here in the United States, the EU proposal would tax stocks and bonds at 0.1 percent and derivatives — Credit Default Swaps, Collateral Debt Obligations, futures, options, etc., — at a very minimal 0.01 percent.
How will the money be spent and how can we make sure that the money isn't co-opted?
The Tax Wall Street Party strongly advocates that revenues raised from a 1% Wall Street Sales Tax — to be divided evenly between the federal government and the various states — should be used first to end the "sequestration" budget cuts and rebuild the nation's tattered social safety net. H.R. 1000, introduced by Congressman John Conyers, proposes a similar tax (albeit with much lower rates), and directs the proceeds to a "trust fund" used for job creation and training.
To take another example, the Robin Hood Tax, sponsored by the British NGO Oxfam, is proposed as a means to pay for global health and climate change projects. "Robin Hood," endorsed by the excellent National Nurses United, is not only an unwise name in America, but an illustration of how the proceeds of this tax could be misused if they are not reserved for broad-based public purposes.
Is this Constitutional?
The idea of a financial transaction tax has long withstood any constitutional challenge. In fact, although you need a magnifying glass to see it, a very small financial transaction tax — 0.0034 per cent on stock transactions — remains on the books today and is used to fund the Securities and Exchange Commission (SEC).
Why do we need more taxes?
Who are "we"? Ordinary citizens pay sales tax, gasoline tax, property tax and income tax. Yet financial speculators pay absolutely nothing on more than $5 quadrillion in annual transactions involving stocks, bonds, and derivatives. And their income tax rates, counted as capital gains, are lower than yours and mine. It is plainly unfair that the victims of Wall Street's recklessness are asked to bail out those who nearly destroyed the U.S. and global economy.
1%? Why not 10%?
Why should a hedge fund pay a lower tax rate on worthless derivatives than the average person pays on a pair of shoes, an appliance or an automobile? A fair question. The ideal Wall Street Sales Tax will be high enough to curb dangerous speculation (like high-speed programmed trading), but low enough to keep normal investments and risk management possible. We believe a 1% tax fits that bill better than the much lower rates demanded by other advocates of a Wall Street Sales Tax.
Why a sales tax? Can't we just raise income taxes on the “1%”?
One of the strongest arguments for a Wall Street Sales Tax is that it collects tax revenue at the moment financial transactions cross an exchange. These speculative flows are the primary source of income for today’s super-rich, who suck credit out of the real economy through their monopoly on money. We need to tax these unearned trillions before they end up in offshore tax havens or hidden with accounting tricks and loopholes.
How much tax revenue will this raise?
The short answer is “nobody knows”. On one hand, many derivatives are sold outside of regulated exchanges – which is why we must force them to cross exchanges and pay the tax in order to be legally enforceable. On the other, a tax will reduce the volume of trading, especially computerized, “high-frequency” trading. Based on a study by Dean Baker and others at CEPR, we would project a 1% Wall Street Sales Tax to yield hundreds of billions per year in tax revenue, possibly as high as $1 trillion. Some of this will be offset by lower tax revenue from capital gains, but we would still estimate the net gain to be in the hundreds of billions, more than enough to derail any plans for budget austerity.