Dean Baker: Tax Wall Street Trades

Specifically, Baker advocates a per-trade tax of 0.03 percent, as a discouragement to financial speculation... i.e., gambling... as proposed in the Joint Tax Committee of Congress by Sen. Tom Harkin and Rep. Peter DeFazio:

As the presidential election builds up steam, the Washington elites in both parties are actively scheming to find ways to cut Social Security and Medicare benefits for retired workers. The media have widely reported on efforts to slip through a version of the deficit reduction plan developed by Morgan Stanley director Erskine Bowles and former Senator Alan Simpson. Since the vast majority of voters across the political spectrum reject cuts to these programs, the Washington insiders hope to spring this one on us after the election, when the public will have no say.

That is the sort of anti-democratic behavior we expect from elites who naturally want to protect their own interests. Of course the rest of us are more concerned about the well-being of the country as a whole rather than preserving the wealth of the richest 1 percent.

For the 99 percent there are much better ways of dealing with whatever deficit problems may arise down the road. Most obviously, insofar as we need more revenue we can look to tax the sort of financial speculation through which the Wall Street gang makes its fortunes. A very small tax on trades of stocks, options, credit default swaps and other derivative instruments could raise a vast amount of money.

The Joint Tax Committee of Congress estimated that a tax of just 0.03 percent on each trade, as proposed by Senator Tom Harkin and Representative Peter DeFazio, would raise more than $350 billion over the first nine years that it is in place. This is real money. It is an order of magnitude larger than the measures that have been suggested to go after the wealthy, such as President Obama's bank tax or most versions of the Buffet Rule.

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This sounds right to me. People and corporations that use algorithms to execute ceaseless trades every millisecond or so are not contributing to the soundness of society or the economy, whether they make tons of money or not, and they should be made to pay for the practice. Slightly off topic, I also see no reason why capital gains should be taxed at a dramatically lower rate than earned income, but as far as I know, changes to that practice are not even on the table.

(Full disclosure: I have a relatively small amount of money invested. Literally none of my investments were speculative: all were chosen after I did considerable research to be as certain as I could be that the companies behind them are socially responsible (or better still, socially useful), and all have been held long-term. For my troubles, I have lost a fair amount of money in the market; I'd have done better with money in the mattress. But at least I didn't fund bombs, nuclear plants or genetically modified organisms. I sleep well with my decision. But in a legitimate market, I'd have been able to do well by doing good.)

If Baker is right, and the plans of Bowles and Simpson are sprung upon us after the election, it may well be that in this respect (as in so many others) it really doesn't matter who you vote for. Obama's advisors and cabinet members (i.e., department heads) are straight from the Street; none of them are going to do a damned thing in behalf of the 99 percent. Then again, there's Rmoney... he's the man who milks and then discards successful corporations, destroying jobs, using other people's money and taking a large cut himself, not to mention refusing to talk about his offshore accounts. Given that Rmoney apparently has Crossroads support, I guess you could call him a "Rove-ing gambler." So no matter who wins the presidency, no per-trade tax will happen, Washington will be awash in money as always, and the 99 percent... well, we lose. We always do.

Still, it's good to keep a per-trade tax in mind, just in case there's ever (ahem) an extraordinary change in the climate in Washington and actual change is possible. One can dream.