You are hereThe Nation: Cut Wall Street Down to Size With a Financial Speculation Tax

The Nation: Cut Wall Street Down to Size With a Financial Speculation Tax


-By Sarah Anderson

June 8, 2011- If you want to transform the economy, you have to cut Wall Street down to its proper size. One way to do that is to tax the short-term speculative activities that dominate and distort financial markets.

For ordinary investors, the costs would be negligible, like a tiny insurance fee to protect against crashes caused by speculation. But for the highfliers who are most responsible for the financial crisis, the tax could raise the cost of highly leveraged derivatives trading and stock-flipping enough to discourage the most dangerous behavior.

Remember the “flash crash” of May 6, 2010, when the Dow plummeted nearly 1,000 points? If a tax of only 0.25 percent on each transaction had been in place for just the twenty most frenzied minutes of that day, traders would’ve faced $142 million in fees.

And remember AIG’s credit default swaps? A financial speculation tax might not have stopped those greed-crazed fools, but at least Uncle Sam would’ve taken in about $1.1 bil-
lion on the deals.

The Center for Economic and Policy Research predicts that a tax on trades of stocks, derivatives and other financial instruments would curb excessive speculation while generating around $150 billion a year. That would be enough, for example, to fill projected Social Security shortfalls, with dough left over for other domestic and international needs.

So US politicians must be jumping on this as a solution to the country’s deficit problems, right? Not exactly. For more than a year, a diverse array of labor, consumer, environmental, global health and other progressive organizations have been hammering away on them, as part of a broader international campaign. But while legislators have introduced eleven bills to create various forms of speculation taxes, none have gained serious momentum.

In 2009, according to a WikiLeaks cable, former British Prime Minister Gordon Brown tried the diplomatic equivalent of a rugby maul to get Treasury Secretary Timothy Geithner on board with a G-20 agreement on financial speculation taxes. Such international coordination, while not necessary, would help address concerns about potential tax avoidance.

FULL STORY HERE:

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