Eleven European countries, who collectively account for two-thirds of the EU's economy, have passed a new financial transaction tax.
Also known as the Robin Hood Tax in the US, a financial transaction tax charges a small percentage fee for every stock market deal. The new European law will charge a rate of 0.1% on any trade of shares or bonds and 0.01% on any financial derivative contract, according to an article in Think Progress. These tiny percentages would raise an estimated 57 billion euros per year if all 27 of the European countries adopted the law. (At an exchange rate of 1 EU = $1.33, that is an estimated $75.8 billion in US dollars per year of revenue generation.) In addition to raising funds, the financial transaction tax discourages speculative computerized trading. Also know as "rent seeking," computers are set up to buy stocks and sell them quickly– sometimes when the profit is just pennies. If you do enough of this automated micro-trading, you can make a bundle of money; but this speculative behavior adds volitility to the market and produces nothing except fot the gamblers who are in the game. The Ed Schultz Show has a great explanation here.
In all, 40 countries worldwide have adopted a financial transaction tax. The 11 countries who have passed the Robin Hood Tax recently include two European powerhouses– Germany and France– plus Spain, Portugal, Italy, Belgium, Austria, Slovakia, Slovenia, Greece, and Estonia. The financial problems facing Greece, Spain, and Italy have been in the news for years. This tax will help cash-strapped governments to become more stable.
Gosh, what other country is facing dire financial choices and needs an infusion of cash? Find out how the Robin Hood Tax would help the US economy after the jump.
Since the Republicans took over the House of Representatives in 2010, the US Congress has been having the same austerity vs prosperity arguments that pushed European citizens into the streets in recent years. With the Republicans' clear goal of protecting the rich, the corporatists, and Wall Street gamblers, the right wing noise machine has been hawking belt-tightening for the 99% and welfare for corporate citizens as the solution to our country's fiscal problems (which were largely created by the Congress, the rich, the corporatists, and the Wall Street gamblers). "We must live within out means. We must cut entitlements!" is the Fort Sumner Teapublican battle cry. Although moderate-to-left-leaning politicians, pundits, economists, and activists say we can't cut our way out of our deficit hole, the Teapublicans are sticking to their guns (in more ways than one).
The Congressional Progressive Caucus, Progressive Democrats of America (PDA), and National Nurses United (NNU) have been pushing for the financial transaction tax, which was introduced into Congress in 2012 by Congressman Keith Ellison as the Inclusive Prosperity Act (HR6411).
New York – The U.S. Robin Hood Tax Campaign today applauded the introduction in Congress of a bill that would impose a tax on Wall Street speculation. Introduced by Rep. Keith Ellison, HR 6411, the Inclusive Prosperity Act, would raise up to $350 billion in annual revenues that would be used to breathe new life into Main Street communities across America, as well as international health, sustainable prosperity and environmental programs. [Emphasis added.]
The legislation embodies the Robin Hood Tax, a 0.5% tax on the trading of stocks, 50 cents on every $100 of trades, and lesser rates on trading in bonds, derivatives and currencies. It marks the return of a sales tax on financial transactions in place from 1914 to 1966 and targets the high-risk, high-speed trading that dominates the markets.
“The American public provided hundreds of billions to bailout Wall Street during the global fiscal crisis yet bore the brunt of the crisis with lost jobs and reduced household wealth,” said Rep. Ellison in a press statement. “This is a phenomenally wealthy nation, yet our tax and regulatory system allowed the financial titans to amass great riches while impoverishing the systems that enable inclusive prosperity. A financial transaction tax protects our financial markets from speculation and provides the revenue needed to invest in the education, health and communities of the American people.”
More from Think Progress…
As former Labor Secretary Robert Reich tweeted, “Most of Europe will now tax financial transactions, generating billions for hard-pressed budgets. U.S. should do same.” It’s unclear how much revenue Europe will raise, but the European Commission “had previously estimated that such a tax across the 27-nation bloc could yield €57 billion a year,” while “the 11 nations pushing ahead represent about two-thirds of the EU’s economy.”
Here in the U.S., lawmakers have unsuccessfully tried to implement a financial transactions tax in the aftermath of the 2008 financial crisis. The benefits of such a tax are two-fold. First, it would raise billions of dollars to repair a federal budget that expanded in the wake of a recession caused in large part by Wall Street malfeasance, thus making the financial sector repay for the damage it caused. Second, it would slow down some of the high-frequency trading that hasexploded in recent years, bringing more stability and safety to financial markets.
Last year, a group of 52 financial executives, including several former heads of mega-banks JP Morgan and Goldman Sachs,endorsed the idea. Forty countries around the world have already embraced a transactions tax.
Watch Ed Schultz Show on MSNBC explain it.
Read about the benefits of the Robin Hood Tax (HR6411).
We can do this. Locally, Congressman Raul Grijalva backs the financial transaction tax, and PDA Tucson has been pushing Congressman Ron Barber in this direction with monthly letter drops and phone calls to his office. (More about this on PDA Tucson's Facebook page.) If you think the financial transcation tax is a good idea to painlessly raise billions– instead of making Grandma switch to a cat food diet— call you Congressional representatives and tell them to sign as sponsors to HR6411. (Do it!)