October 30, 2011
The Canadian anti-capitalist magazine Adbusters helped launch the Occupy Wall Street movement this summer when it called for protesters to descend on lower Manhattan on September 17. As the protests spread across the country and overseas – and as Occupiers continue to discuss internally whether they should pursue specific demands, and what those demands might be – the magazine once again put out a call to action, urging supporters around the world to take to the streets yesterday to demand a 1 percent “Robin Hood” tax on financial transactions and currency trades.
“Let's send them a clear message: We want you to slow down some of that $1.3-trillion easy money that's sloshing around the global casino each day – enough cash to fund every social program and environmental initiative in the world,” reads a “tactical briefing” addressed to “redeemers, rebels and radicals” posted on the adbusters.org website earlier this month. The group said actions would take place in the United States, Canada, the U.K. and other countries.
Bad weather on the East Coast of the U.S. may have put a slight damper on the planned protests. In Washington, a couple hundred people marched from McPherson Square to the Treasury Department building and the Bank of America branch across the street in support of the tax. Later, the protesters had a “teach in” about the tax with economist Dean Baker of the Center for Economic and Policy Research and Emira Woods of the Institute for Policy Studies. “There certainly would have been lots more folks out from the community if it had not been pouring rain and sleeting,” said Occupy DC member Matt Kavanagh, “but I was pretty impressed to see several hundred people out on a completely gross and rainy day to talk about taxing the financial industry to pay for what our communities need.”
Supporters say that a small tax on stock and other transactions would curb speculative trading, reduce engineering of complex financial instruments, and raise much-needed revenues, while enacting a measure of financial justice at the same time. In a letter to Sen. Patty Murray (D-Wash.) and Rep. Jeb Hensarling (R-Texas), the co-chairs of the congressional “super committee” tasked with finding $1.2 trillion in deficit reduction measures by November 23, a group called Americans for Financial Reform, which is a coalition of more than 250 economic, union, and activist groups, explained why it’s backing the tax:
“The deficit problem that the Select Committee must address was to a significant degree created by the world financial crisis, a crisis caused by Wall Street speculation. It is therefore appropriate that we call on Wall Street to help address it. A small tax on financial market transactions has the potential to raise significant revenue and simultaneously limit reckless short-term speculation that can threaten financial stability.”
Baker, an economist, has calculated that a tax of about 0.5 percent on stock transactions, with lesser rates on other trades, could raise $175 billion a year even if trading volumes drop 50 percent from 2008 levels. The European Commission has estimated that a proposed tax of 0.1 percent on EU stock and bond trades and 0.01 percent on derivatives contracts could raise $78 billion a year.
Critics, including many on Wall Street who stand to lose trading profits, argue that the tax would harm investors and businesses by raising costs, reducing liquidity and leading traders to move their dealings to other exchanges. “A transaction tax will cycle through the entire U.S. economy, harming both investors and businesses,” a number of business and financial industry organizations wrote in a September 22 letter to Treasury Secretary Timothy Geithner. “In light of the current fragile state of the global markets and the economy, and with many economies experiencing high levels of unemployment and sluggish recoveries, the imposition of such a tax would be particularly harmful.”
The Investment Company Institute, the mutual fund industry trade group, calculated in 2009 that had a securities transaction tax of 0.25 percent been in place in 2008, “shareholders in stock, bond, and hybrid funds would have had their returns reduced by $48 billion.”
Supporters say that by setting a low rate for the tax, the impact on pension funds and individual investors who don’t engage in frequent trading would be minuscule. And they point out that the liquidity and health of the London Stock Exchange hasn’t been unduly damaged by Britain’s 0.5 percent “stamp duty” on stock trades there.
The idea to "throw some sand in the wheels" of the global financial machine is not new. The Robin Hood tax has been bandied about for many years under many (less folksy) names: a financial transaction tax, financial activities tax (or FAT), financial speculation tax, security transaction excise tax, and the “Tobin tax” after Nobel Prize-winning economist James Tobin, who in 1972 first proposed levying a small charge on currency transactions in order to ease exchange-rate volatility. "The idea," Tobin later wrote, "fell like a stone in a deep well."
But the idea has cropped up again numerous times over the last 40 years, most recently in the wake of the 2008 financial crisis. In 2009, the head of Britain’s Financial Services Authority, Adair Turner, proposed a tax to rein in "socially useless" speculation. In the U.S. that same year, Rep. Peter DeFazio (D-Ore.) and Sen. Tom Harkin (D-Iowa) proposed a 0.25 percent transaction tax. The idea again went nowhere.
Proponents are now trying to revive it once more. It was proposed by the European Commission last month. German Chancellor Angela Merkel and French President Nicolas Sarkozy have both voiced support for the tax, which is expected to be on the agenda at the G-20 economic summit in France on November 3 and 4.
Adbusters’ call for marches yesterday was timed with the summit in mind. DeFazio and Harkin will reintroduce their proposal this week. The National Nurses Union, one of the labor groups backing a financial transaction tax, is planning a protest on November 3 to “bring the demand to the doorstep of the U.S. Treasury Department.”
Geithner and the Obama administration have opposed the idea. And even as advocates again try to build momentum for the tax, the prospects for it passing a divided Congress where Republicans are staunchly opposed to any additional make the Robin Hood tax a non-starter.