Opinion: Sales tax on Wall Street trades can build main street
It’s not surprising that last year’s gubernatorial election centered on the sorry state of Michigan roads. Having recently driven them while back home for a high school reunion, I can attest to their teeth-clattering level of disrepair.
Much worse is the heart-wrenching fact that far too many of Michigan’s children and other vulnerable residents continue to face the threat of unsafe drinking water due to a lack of infrastructure investment. And the disturbing drop in Michigan education funding over the past several years shows how desperately the state could use more money to invest in public schools.
Federal tax dollars can and should be part of the solution to addressing these obstacles facing Michigan and to minimizing economic inequality everywhere. That’s why it’s fantastic to see the huge amount of public support for policies that would sharply increase taxes on millionaires and billionaires.
But unrigging the tax system means more than taxing the superrich or undoing the corporate giveaways in the 2017 tax law. The tax debate also must focus on making Wall Street high rollers pay their fair share by putting a sales tax on financial transactions like stock, bond and derivative trades.
According to government estimates, a fee of only 10 cents per every $100 traded would raise nearly $777 billion over 10 years. This money could be spent on needs like infrastructure and education, expanded health care, child care and mitigating climate change.
More than just a revenue generator, though, a sales tax on Wall Street trades has other benefits. For instance, it would tamp down high-frequency trading, the superfast computer trading that has overtaken the market. It was high-speed trading that contributed to the market instability we have seen over the past few months.
Because the profit from high-speed trading comes from being able to make trades a split second faster than the competition, putting a tiny tax on trading will steer activity away from these investment strategies that narrowly chase short-term gains over long-term value creation.
The Nobel-winning economist James Tobin called the effect of the tax “throwing sand in the wheels” of the market to slow speculation. Instead of the emphasis on computer trading that drives instability, a better path for our markets would be to incentivize the type of investments that put capital to work growing jobs in brick and mortar companies.
Given the many benefits from these types of taxes, it’s not surprising that around 40 other countries have them in place. In fact, the U.S. already has an (albeit very small) trading fee in place that funds some of the operations of the U.S. Securities and Exchange Commission. This would just put in place a more robust, expanded version of an existing tax.
It was more than a decade ago when Wall Street recklessness crashed the economy, but some hardworking families are still struggling to regain their footing. Yet banks are making record profits and cashing in from the generous tax cuts they received—all while buying back their own stock.
The number of lawmakers calling for a sales tax on Wall Street trades grows. Presidential candidates like U.S. Sen. Bernie Sanders (I-Vt.) and Kristen Gillibrand (D-N.Y.) support it. And, a new bill, The Wall Street Tax Act of 2019, was just introduced by U.S. Sens. Brian Schatz (D-Hawaii) and Chris Van Hollen (D-Md.) and Representative Peter DeFazio (Ore.) to put a tax of .1 percent on stock, bond and derivative trades.
After several years, that rate would bring in more than $100 billion per year. In one year, that could pay for more than a million teaching, clean energy or infrastructure jobs. It could fund a year of more than 11 million Head Start spaces, health care for more than 42 million low-income kids, or health care for 9 million veterans. Or, that amount could pay the way to four-year colleges for more than 3 million students. The list of possible investments is endless.
The question shouldn’t be whether to tax Wall Street trades but when?
Standing up to the financial industry will take vision and commitment. Hopefully, Michigan’s senators and representatives will see the potential and join their colleagues in calling to use Wall Street’s dime to rebuild Main Street.
Not to mention fix the potholes in I-75
Susan Harley is deputy director of Public Citizen’s Congress Watch division.