High Frequency Trading (HFT) would be a very progressive tax.
Have you heard about High Frequency Trading? Get ready to be dazzled! High frequency trades are sweeping, purely speculative financial transactions that have been made possible by huge leaps in technology. Done by super-fast computers, using mathematical algorithms, HFT searches millions of prices at lightning speeds and places bets automatically. Transaction times are measured in milliseconds, as the global network of “trading robots” never sleeps, and its sole function is to allow the wealthiest speculators to skim quick profits out of markets.
Guess how much in taxes folks pay on the sales in the HFT game? When I buy a $3 pack of toilet paper here in Austin, Texas, I pay an extra 8.25 percent in sales tax. But if a high roller in the High Frequency Trading game buys $10 million worth of corporate stock, he or she pays zero tax on the sale.
So maybe we need an FTT on HFT. A Financial Transaction Tax is not an idea whose time has come, but simply returned. From 1914 to 1966, our country taxed all sales and transfers of stock. The tax was doubled in the last year of Herbert Hoover’s presidency to help us recover from the Great Depression. Today, 40 countries have FTT’s, including the seven with the fastest-growing stock exchanges in the world. Seven members of the European Union voted for an FTT (including France and Germany) to help blunt rising poverty, restore services and put people back to work.
This is no soak-the-rich idea. Rather than asking the Wall Street crowd to join us in paying a 6- to 12-percent sales tax, the major FTT proposal gaining support in the U.S. calls for a 0.5 percent assessment on stock transactions. That’s 50 cents on a $100 stock buy, versus the $8.25 I would pay for a $100 bicycle.
Even at this miniscule rate, the huge volume of high-speed trades means an FTT would net about $300-350 billion a year for our public treasury. Plus, it’s a very progressive tax. Half of our country’s stock is owned by the 1 percenters, and only a small number of them are in the High Frequency Trading game. Ordinary folks who have small stakes in the markets, including those in mutual and pension funds, are called buy-and-hold investors — they only do trades every few months or years, not daily or hourly or even by the second, and they’ll not be harmed. Rather, it’s the computerized churners of frothy speculation who will pony up the bulk of revenue from such a transaction tax.
An FTT is an uncomplicated way for us to get a substantial chunk of our money back from high finance thieves, and we should make a concerted effort to put the idea on the front burner and turn up the heat. Not only do its benefits merit the fight, but the fight itself would be politically popular.
The FTT idea is blessed with broad support, ranging from Bill Gates to Occupy Wall Street to the Vatican, and it’s been embraced by dozens of major economists, including Nobel laureates Joseph Stiglitz and Paul Krugman. But this fight will be won at the ground level of good politics, and that’s well underway. Many grassroots groups and several progressives in Congress have already forged solid coalitions and are going to the countryside with a growing campaign to make Wall Street pay.
A major push is being made under the banner of the “Robin Hood Tax,” led by National Nurses United, National People’s Action, Health GAP and Progressive Democrats of America. They and some 150 other organizations are backing the IPA. (This IPA is not a beer, though I suggest the organizers brew one to help popularize, cheer and lubricate the cause.) It’s the Inclusive Prosperity Act, a proposal by Rep. Keith Ellison and others for an FTT. Sen. Tom Harkin and Rep. Peter DeFazio have another version with a more modest tax rate.
A sales tax on speculators can deliver tangibles that people need but Wall Street says we can’t afford — infrastructure, Social Security, education, good jobs, etc. Just as important, it can deliver intangibles that our nation needs but Wall Street tries to ignore — fairness, social cohesion, equal opportunity, etc.
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