Retro’s back. So, here’s a real “oldie-but-goodie”: taxing Wall Street trades.
Critics of reinstituting the tax argue that the tax is unconventional, but it’s as classic as Bach. Britain’s tax on the sales of stocks is an element of a stamp duty that’s been in place since the late 1600’s.
In the United States, it was in place more like from ragtime to the Beatles. In 1914 through 1965, the U.S. had a modest Wall Street tax, also known as a financial transaction tax ‒ ranging from 0.02 to 0.06 percent ‒ in place. And if we count the minuscule fee on U.S. stock trades currently funds operations of the Securities and Exchange Commission (SEC), you could say a similar tax has been in place up to and including the Taylor Swift era.
As detailed in the new report from Public Citizen’s Congress Watch division, “Financial Transaction Tax: An Old Solution to a New Problem,” the mid-20th century Wall Street tax was shelved as part of a sweeping overhaul of excise taxes, not because of market issues, as some critics claim. The record shows that the tax generated steady revenue during a time of significant growth in the American economy without harm to the market. In fact, the economy grew at 5 percent annually from 1959 until 1965, the period in which the legacy Wall Street tax most closely resembled modest current day proposals.
So what has the American public been missing out on in the past half-century since the government changed its tune and pushed pause on the policy? The report shows that if the tax on transfers of stocks had not been repealed and sales volume had remained the same, the tax could have generated nearly $400 billion (in today’s dollars) for the half century spanning 1966 to 2014. Of that, $333 billion would have accrued since 2000 — an average of more than $22 billion a year in revenue for the past 15 years.
The report also describes that, in addition to revenue creation, the tax would quiet the market and lessen unfair high-speed trading that disadvantages ordinary investors because computers exploit inside information and other technological advantages to snare profits by selling stocks in millisecond intervals. This relatively new problem encourages shortsighted trading strategies that put short-term profits over the traditional investment goal of building successful companies, which in turn create jobs.
Though best known as being backed by progressive leaders like U.S. Senator Bernie Sanders (I-Vt.) and U.S. Rep. Keith Ellison (D-Minn.) who have proposed a 0.5 percent tax on stock trades (with smaller rates for bonds and derivatives), Wall Street financial transaction taxes also have a history of members of both parties singing from the same songbook to praise it. As the report details, former President George H.W. Bush (R) and former Senate Majority Leader Robert Dole (R-Kan.) both supported versions of financial transaction taxes in the early 1990s. In fact, Richard Darman, the director of the U.S. Office of Management of Budget under President George H.W. Bush, in 1990 proposed a financial transaction tax of 0.5 percent as a means to cut the deficit.
Across the pond, all signs point to the inking of a final agreement between eleven European nations to soon implement a collaborative financial transaction tax. China is discussing implementing one to calm its markets. Now is the perfect time for the U.S. to join the chorus and move in conjunction with the international community and to restore the successful policy.
If reviving the tax is music to your ears and you want to get involved in getting high-speed high rollers to pay their fair share, sign the petition to join the million-strong movement calling for a Wall Street tax and use the Facebook and Twitter buttons to share the petition far and wide. Thanks in advance for helping amplify the message calling on congress to reinstate financial transaction tax.
Susan Harley is the Deputy Director of Public Citizen’s Congress Watch Division