It’s Time for More Taxes. Here’s a New One, The Financial Transactions Tax
Taxophobia is endemic among Americans and by extension their pandering politicians, local state and national. It took an amazing amount of courage for Illinois Governor Pat Quinn to run advocating a state income tax increase, and even more amazingly he won, proving you can sometimes make a very difficult case to the electorate.
We need increased revenues at virtually every governmental level in the nation. It’s utter nonsense to believe we can or should cut spending enough to pull us out of our financial holes—though ending military excesses and the fiscal hemophilia of our ongoing wars would be giant steps in the right direction.
Obviously, we should end the Bush-Obama tax cuts for the very rich. But there is yet another tax that can be imposed—here in Chicago and on the national level—that can provide impressive new revenues without touching a dime of most citizens’ pocketbooks.
It’s the Financial Transaction Tax (FTT)—a very low sales tax on certain specialized financial “products” on various exchanges. No, it won’t affect ordinary stock, bond, option or mutual fund purchases—or retirement programs. The tax would apply only to exotica such as index futures, options on index futures, currency futures and related speculative investments—the kind of fancy money manipulations that helped put us in the hole in the first place.
Buyers and sellers of those speculative investments would pay a small tax on each contract, which would be collected by the Chicago Board Options Exchange or Chicago Mercantile Exchange the way ordinary merchants collect the sales tax.
Bill Barclay, a 22-year veteran of Chicago exchanges and a founding member of the Chicago Political Economy Group, calculates that a municipal tax of ten cents per contract traded on the two exchanges would have netted the city $607 million in 2008 and $462 million in 2009. Goodbye $655 million deficit, hello tax relief!
While mayoral candidates Rahm Emanuel and Gery Chico snipe at each other about whether to tax limousine services or gymnasiums—quietly hoping for a casino to generate new revenues—only Miguel del Valle has mentioned a local FTT. Unfortunately it’s not a centerpiece of his campaign.
The FTT is not a radical new soak-the-rich idea. This country had various forms of stock transfer taxes between the Civil War and 1960. New York has an FTT but strangely rebates it to Wall Street’s fat cats.
Meanwhile, Iowa Senator Tom Harkin and Oregon Rep. Peter DeFazio have introduced a federal version to the Congress. Nobel Laureate economists James Tobin and Paul Krugman support the concept to control speculation—as does the more Wall Street oriented Larry Summers. Conservative heads of state across Europe, including Germany’s Angela Merkel also favor it.
The complexities in devising a local or federal FTT are immense. The most powerful financial interests in America will fight it tooth and nail. But it’s an idea whose time has come again.
Don Rose is a regular columnist for the Chicago Daily Observer