The U.S. should follow the lead of 10 European countries that are now working out the details of a planned financial transaction tax (FTT), Public Citizen, Americans for Financial Reform and Stamp Out Poverty said today.
The issue is on the agenda of this year’s final meeting of the Economic and Financial Affairs Council (Ecofin) in Brussels, scheduled for Tuesday. In May 2014, the finance ministers of France, Germany, Spain, Belgium, Italy, Estonia, Austria, Portugal, Greece and Slovakia committed themselves to the joint adoption of a tax on transactions involving equity shares and “certain” derivative contracts. The European FTT (also known in the U.S. as the Wall Street tax) is expected to collectively raise billions of euros in annual revenue for the finance ministries of each of the 10 participating countries. According to the May agreement, the tax will take effect no later than Jan.1, 2016.
Financial transaction tax advocates worldwide are working together today to urge the Ecofin financial ministers to agree to a strong FTT. Activists are collaborating on social media actions, and press events are planned in Germany, France, Italy and Spain.
By discouraging risky speculation, a Wall Street tax could help defend the world economy against another financial meltdown – a point cited by the participating EU nations as an important motivation behind their proposal.
“These European nations are taking a sensible and much-needed step to ensure the stability of the financial system and hold large financial institutions accountable for their part in causing worldwide recession,” said Susan Harley, deputy director of Public Citizen’s Congress Watch division. “These Eurozone nations should agree to a strong tax that will pave the way for U.S. policymakers to pass legislation to tax Wall Street and require it to pay its fair share of the cost of government.”
David Hillman, director of Stamp Out Poverty, an organization that has been campaigning for the FTT for a number of years, said, “We are looking for an ambitious FTT that will raise substantial additional revenue to create jobs in Europe, help fund health care and combat climate change in the developing world.”
“A transaction tax can raise significant revenue, cut down on dangerous high-frequency trading, and incentivize Wall Street to serve real economic needs,” said Jim Lardner, communications director for Americans for Financial Reform, a broad coalition of public interest groups. “It is time for the U.S. to get on board.”
Reckless financial practices contributed to a worldwide recession in 2008. A Wall Street tax, in addition to bringing in significant revenue, would discourage high-frequency trading and other forms of speculation while having little effect on ordinary investors.
There is plenty of precedent for such a tax. From 1914 to 1966, America taxed stock issuances and transfers. That tax doubled during the Great Depression and brought desperately needed revenue to the American economy.
A Wall Street tax of similar structure to Europe’s would tax only a small percentage of every stock market and derivatives trade and would have a negligible effect on long-term stock holdings. Bills to establish a Wall Street tax in the U.S. are pending in Congress.
Although the U.S. does not have a robust FTT, it imposes a tiny fee on stock trades to fund the work of the Securities and Exchange Commission. Thirty other countries, including the UK and Switzerland, have some version of an FTT. Warren Buffet, Bill Gates and Mavericks owner Mark Cuban support the idea.