Despite the Chamber’s Claims, a Wall Street Sales Tax Would Fall on Wall Street High Rollers, Not Average Citizens
Almost exactly 11 years ago, Wall Street’s reckless behavior crashed the nation’s economy, devastating the lives of millions. Now, the rules put in place after the financial crisis to stop bank “gambling” in the stock markets are being weakened by through deregulation and speculation is still rampant on Wall Street. Additionally, Big Banks are making record profits while the rest of the country still continues to struggle. The system is rigged, and the U.S. Chamber of Commerce would like it to stay that way.
On Monday, the Chamber released a new report taking aim at legislative proposals to implement a financial transaction tax. The report misleadingly says that ordinary Americans would suffer the brunt of its effects. As is typical of the Chamber, this argument hides its agenda of protecting wealthy and powerful interests behind hollow rhetoric of safeguarding the ‘little guy.’
The idea behind a proposed financial transaction tax or FTT (also called a Wall Street sales tax or Robin Hood tax) is to levy a small fee—just a fraction of a percent—on Wall Street trading of stocks, bonds, and derivatives. In the proposed Wall Street Tax Act of 2019 (S. 647/H.R. 1516) for instance, trades would be taxed at a rate of just 10 cents per every $100 traded.
An FTT would have the dual aims of taking a step toward having Wall Street pay its fair share of taxes, as well as curbing bad behavior on Wall Street, such as dangerous high-frequency trading. These computer programs trade thousands of stocks per second based on algorithms and they currently account for over half of U.S. trading. High-frequency trading could lead to another financial catastrophe if not curbed—for example, they were a primary cause of the May 2010 “flash crash.” And, high-frequency trading is rightfully being blamed for worsening recent market disruptions.
There are other important arguments for a financial transaction tax as well. For one, ordinary people pay sales taxes on most kinds of goods and services, but arbitrarily, no such tax applies to purchases of financial securities. Nonpartisan research from the Joint Committee on Taxation shows that at a rate of just 10 cents per every $100 traded, such a tax would raise an estimated $777 billion over 10 years, which could be used to help rebuild Main Street and invest in programs that working families need.
The Chamber’s report claims that an FTT is “a tax on investors” and that “Main Street will pay for the tax, not Wall Street.” This claim is unfounded. As Public Citizen’s recent report shows, only about half of U.S. families would likely experience any costs at all from a WSST because only about half of U.S. families have retirement accounts. Furthermore, this report demonstrates, a WSST would be a progressive tax:
Perhaps the most deceptive argument the Chamber makes in its report is its assertion of the myth that an FTT will mostly be paid by retirement investors. The truth is that a Wall Street sales tax would only cost the average middle-income family with a retirement account about $13 a year and even among upper-income families, the tax’s effects would hardly be onerous. Further, because reduced volume would reduce mutual funds’ overhead costs, retirement investors could potentially net savings from an FTT.
An FTT is not merely a theoretical policy, either; it has numerous tried-and-true precedents. The United States has had such taxes in the past, and even today, the Securities and Exchange Commission charges a tiny fee on securities transactions to help finance the Commission. Beyond this, 40 countries have implemented an FTT and the idea is supported by a broad range of prominent thinkers on both sides of the aisle, including Nobel-Prize-winning economists; former heads of Treasury, Federal Reserve and other agencies; financial professionals; and even billionaire business magnates.
These many benefits of taxing Wall Street trades may not persuade the U.S. Chamber of Commerce, devoted as it is to protecting the profits of corporations no matter the cost to society. But they should convince our lawmakers. We must take action today to unrig our tax code and build a society that works for all Americans, not just the wealthiest few.
Please tell your U.S. Representative and Senators to pass the Wall Street Tax Act (S. 647/H.R. 1516) and the Inclusive Prosperity Act (S. 1587/H.R. 2923).