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Tag: Financial transaction tax

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

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

    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.