By Robert Weissman, president, Public Citizen
Americans have a right to expect Wall Street to pay. Wall Street should pay for the trillions of dollars of public supports it has received to continue operation, and it should pay for the massive damage it has inflicted on the national and global economy.
A speculation tax – a sales tax applied to stocks, derivatives and other financial instruments – is an ideal way to make this happen.
A speculation tax has at least three distinct benefits.
First, it can slow the churning of stocks and financial instruments on Wall Street. Too much of Wall Street’s business is based on lightning trades to capture very small margins. This business contributes little or no social value. Because it relies on high degrees of leverage, it puts financial institutions at risk – and, worse, endangers the entire financial system.
Second, a modest speculation tax can raise very substantial revenues. A quarter percent tax on stock trades, and a commensurate rate tax on other instruments, could raise $150 billion a year. That’s still a lot of money, even in Washington. There are many good purposes to which it could be allocated.
Third, the speculation tax will be extremely progressive. It is self-evident that it is the richest Americans who trade stocks the most. The richest 1 percent of Americans own about 40 percent of the stocks; the top 10 percent own about 80 percent.
Public Citizen today thanks U.S. Rep. Peter DeFazio (D-Ore.) for his leadership in introducing a bill to establish a speculation tax on the trade in stocks, derivatives and other financial instruments. Rep. DeFazio’s “Let Wall Street Pay for the Restoration of Main Street Act” is co-sponsored by Reps. Mike Arcuri (D-N.Y.), Ed Perlmutter (D-Colo.), Bruce Braley (D-Iowa), Betty Sutton (D-Ohio) and Bob Filner (D-Calif.). It would allocate the raised funds for the purposes of job creation and deficit reduction. The speculation tax is an idea whose time has come. We expect it to gain traction in Congress quickly, and we are committed to working to help it become law.