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Paul Buchheit
NationofChange / Op-Ed
Published: Monday 22 July 2013
The tax is simple and effective and fair and long-overdue, and obvious to everyone except the business-friendly members of Congress.

The Insanity of Not Having a Financial Transaction Tax

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The logic for the tax is indisputable:

-- 1. Financial industry speculation devastated middle-class homeowner wealth.-- 2. U.S. investors pay zero tax on their speculative transactions.-- 3. The tax is easy to implement, and is very successful in other countries.

The emotional appeal reaches most of America:

-- Why should the rest of us pay up to 10% on the necessities of life while risky derivative purchases aren't taxed at all?-- Why should kids around the country lose their arts programs while trillions of dollars flow, untaxed, to Wall Street?

On July 8th, 2013, Chicago Political Economy Group (CPEG) member Bill Barclay and Illinois Green Party Chair Rich Whitney presented arguments for the Financial Transaction Tax (FTT) in front of the Illinois Pension Reform Committee. The video is available here (01:29:40), and the slideshow here. Much of the following derives from their work.

The Tax Works in Countries with the 'Freest' Economies

A good place to start is Singapore. Or Hong Kong or Switzerland. These are three of the top five countries on the Heritage Foundation's Index of Economic Freedom, and they all have FTTs. Critics who might argue that non-FTT taxes are lower in Singapore and Hong Kong should look at World Bank and CIA World Factbook datasets, both of which show the U.S. with lower tax revenues as a percentage of GDP. The U.S. is clearly undertaxed across a wide range of taxes.

Unimaginable Amounts are being Traded in the U.S., with zero tax

Unfortunately, in our country, discussions about pension reform and education and infrastructure usually lead to talk about further cutbacks, as if that were the only solution. But pension funds and schools lost money because of financial industry malfeasance. And yet the financial industry keeps surging ahead. The 2012 trading volume for the Chicago Mercantile Group (CME) alone was $806 trillion, about 12 times more than the entire world GDP. In 2011 it was over $1,000 trillion -- that's a mind-dizzying $1 quadrillion.

There's no sales tax on all that, just a tiny administrative fee. We've had to look elsewhere for our education funds. As Whitney noted, "Our tax system taxes poverty far more than it taxes wealth."

A Tiny Tax Would Pay the Entire 2013 Federal Education Budget

A bill sponsored by Illinois Representative Mary Flowers would impose a modest .01% tax on CME stock and derivative trades. It would not include transactions involving securities held in retirement or mutual fund accounts. With this little tax, at current trading levels, up to $80 billion would be realized annually. Chicago-area trading alone would pay the entire federal education bill.

It's Easy to Administer -- Especially for One of the Most Profitable Companies in America.

What are the objections? Administrative cost and inconvenience? No, the FTT is easy to administer, and difficult to evade. Clearing houses already review all trades, and serve as collection agencies for transaction fees.

How about the threat of a move to another state or country to avoid new taxes? It's hard to imagine that from the CME Group, made up of the Chicago Mercantile Exchange and the Chicago Board of Trade. From 2008 to 2010 the company had a profit margin higher than any of the top 100 companies in the nation.

Big Revenues, Little Risk

Objections to the FTT seem superficial in light of the two main benefits: (1) The massive revenue potential; and (2) the likelihood of limiting the speculative trading that contributed to the financial meltdown in 2008. Informed Americans are in agreement on this. The tax is simple and effective and fair and long-overdue, and obvious to everyone except the business-friendly members of Congress.



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ABOUT Paul Buchheit

Paul Buchheit is a college teacher with formal training in language development and cognitive science. He is the founder and developer of social justice and educational websites (UsAgainstGreed.org, RappingHistory.org, PayUpNow.org), and the editor and main author of "American Wars: Illusions and Realities" (Clarity Press). He can be reached at paul@UsAgainstGreed.org.

Come on WHY do we need a

Come on WHY do we need a financial transaction tax. Rich folks complain they are being picked on if we tax them.

Besides we can tax students easier. They don't have much political power anyway so we don't have to worry about reducing the political contributions or other bad things like that.

Micro-trades, that is, trades

Micro-trades, that is, trades of 100, 200, 300 shares at a time and in increments of fractions of a penny difference are the tools of manipulation. These trades are made by brokers acting on behalf of Wall Street bank-operated hedge funds and are for their benefit as well as on behalf of their corporate clients and private equity funds. A strong link with the options trade would be quite enlightening in this regard.

Nearly always the push is downward and is for the purposes of: acquiring a small cap company on the cheap; triggering certain corporate (small cap) bond covenants requiring a share price above a stated minimum; or to utterly destroy a small cap competitor whose product(s) may be a threat to a large cap corporation. A micro-percentage "sales tax" on these types of trades will do nothing to stop them. The SEC refuses to act on them even when the evidence is presented to them on a silver platter. The only curb that will work is a mandatory trade fee of $5-10 per trade. 100-share trades can currently be made all day long without concern for being discovered. Those same 100-share trades made all day long at progressively lower penny-fractional changes would then be too expensive and would trigger investigations into the who and why.

Even the wall Street bought-off SEC has stated without reservation that stock manipulation is highly illegal and will be prosecuted to the full extent of the law (SEC's Office of Inspector General's Report No. 450).

SPLF

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