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Financial transaction tax a progressive way to pay for Medicare and Social Security expansion

Written by Diane Archer

One way to pay for a Medicare or Social Security expansion without affecting low or middle-income populations is through a financial transaction tax. A financial transaction tax could easily raise $130 billion a year in additional federal revenue through a miniscule sales tax on stocks and other financial assets every time they are traded.

Here are three key things to know about a financial transaction tax from Dean Baker at the Center for Economic and Policy Research:

  1. The United States could raise more than $130 billion a year or $1.5 trillion over ten years in new revenue through a 0.1 percent tax on stock and a 0.01 percent tax on derivatives (as 11 countries in the European Union are now considering). Of note, the U.S. imposed a 0.04 percent tax on stock trades until the mid-60s. And, China, the United Kingdom, India and Switzerland impose a financial transaction tax today.
  2. The financial transaction tax has virtually no effect on the overwhelming majority of Americans. It generates a tiny sum of money unless you are regularly buying and selling substantial amounts of stock. It principally affects Wall Street and day traders, people who flip stocks worth a lot of money a lot of the time. A 0.1 percent tax on stock trades means that people would pay .10 cents if they bought $100 worth of stock and $1.00 if they flipped $1000 worth of stock.
  3. The financial transaction tax would likely lead to a smaller financial industry, which would mean a more efficient financial industry. Data suggests that investors would make fewer short-term stock trades if there were a financial transaction tax; that would reduce the size of the financial sector, potentially leading people to engage in other work that helped to speed growth.

Bernie Sanders is supporting a financial transaction tax to cover the cost of making public colleges tuition-free. The Obama Administration has been unwilling to support such a tax. Representative Keith Ellison of Minnesota has a bill in Congress that would impose a financial transaction tax. Senator Tom Harkin and Representative Peter DeFazio co-sponsored a bill that imposed a financial transaction tax of 0.03 percent.

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5 Comments

  • This tax would be good only if it were to used to put money into Social Security and Medicare – NOT free college. And NOT towards whatever any politician wants, but for one purpose consistently. It’s the only way to “follow the money” to prevent it from disappearing into someone’s special project.

  • You could just raise the cap on income (even if you have to use the previous year’s income figure) for paying into social security. That would only raise s.s. withholding tax on individuals earning over $126,000.00 annually.

  • The simplest first step ‘fixing’ our Social Services is to cut expenses.

    Medicare’s “Part B” program pays roughly $20 billion a year for the drugs. “Part D” already costs about $80 billion a year and is on track to double by 2022. That’s $100 billion per year, and by 2022, it’ll be $200 Billion.

    The Republican Congress has blocked Medicare from negotiating prices with the drug companies. The reason is pretty obvious; campaign donations are more important than the welfare of the citizenry. Meanwhile, other countries like Canada and Germany sell the very same products that we pay through the nose for at up to 70% discount. Even a 50% cut in medicine costs would be a massive savings to the taxpayer and the consumer. Further, in Canada and Germany, the government negotiated savings have trickled down to regular retailers as well.

    Fix the simple things first. You would think that the ‘cost cutting GOP’ would be all over this simple fix.

  • The financial transaction tax is a no-brainer, but its greatest benefit would be to strengthen and stabilize the economy. And Marlene is right about earmarking the funds. Some worthy candidates are green energy and infrastructure, Medicare, public education, etc. For the safety net, I prefer Thomas’ and John’s remedies.

    But best of all is goode olde HR 676: Expanded and Improved Medicare for All from John Conyers–NOW!!! It’s the solution.

  • This preserve Social Security and retirement:

    Republicans are proposing raising the eligibility to received Social Security. Or privatizing or putting in into private pension funds, plus a flat tax proposal. Senate Majority Leader Mitch McConnell is now advocated raiding federal employee’s retirement savings to fund other projects. And now Jeb Bush wants to phase out Medicare.

    These proposals are noting but sophism – meant to mislead or deceive. When one separates the wheat from the shaft, you find their objective is to retain the tax breaks for the rich. There is only one way to reduce the national debt: Reverse the tax breaks to the rich and abolish corporate welfare. Otherwise, there is a very real possibility the economy could collapse.

    Here is a thought to cogitate about: Do Republicans and Wall Street Democrats want the economy to collapse and create austerity conditions? It would open the door to provide them an excuse to abolish Social Security, Medicare, and other social justice programs. It would also provide an opportunity to abolish other retirement plans particularly for civil service retirees; military retirees.

    Meanwhile, Republicans voted themselves another tax break. While advocating making these cuts, the House voted to give the top 2 percent another $270 billion tax break — repeal the estate tax. (Note: Only estates worth more than $10.9 million for couples and $5.4 million for individuals fall under the tax.)

    Republicans advocating cutting Social security, Medicare, the flat tax proposal are noting more than jingoistic propaganda that amount to brain washing. It is imperative that the tax breaks to the rich are overturned or conceivably the economy could crash.

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