Basically, what we're after is a tax that raises hundreds of billions of dollars annually from the financial sector, to reset our economy, stop austerity policies that are cutting public services, and help in the global fight against poverty, AIDS and other diseases, and climate change.
We think the best way to do this is a Financial Speculation (or Transaction) Tax (FST/FTT). This is a tiny tax of less than half a percent on trades in derivatives, stocks, bonds, and foreign currency exchange. With an FTT, each time a financial product is traded, a tiny percentage (between 0.005% and 0.5%) of the value of the trade is collected in tax.
You can think of it as a sales tax - the sort of taxes we all pay when buying clothes or other goods. In fact, for every $100 ordinary Americans spend on goods they pay an average of $9.64 in taxes. What a Robin Hood Tax asks for is that when the big banks and investment funds are trading they pay a tiny tax of less than 50 cents on $100 of trades. In many cases it’d be less than ½ a cent on $100. Surely that is not too much to ask?
For years Wall Street has been writing the tax rules—pushing for loopholes to ensure that they don’t pay even a tiny tax like this. Meanwhile, the rest of us are left to pick up the slack with more and more taxes on middle-class Americans.
This type of tax is well-tested, cheap to implement and hard to avoid. In fact, there are already lots of different transaction taxes implemented by over 40 countries, even a very limited one here in the US that funds the Securities and Exchange Commission.
They all work on the same principle: taxing every transaction a very small amount. If we apply this broadly, it makes the tax system fairer—but of course it also means Wall Street paying its fair share.
Importantly, transaction taxes are also good in that they would reduce the amount of the most risky transactions, the sort of gambling which helped to trigger the financial crisis, and continues with JP Morgan Chase’s recently announced $2 billion bad bet.
It is this sort of speculation that drove the economic crisis and drives up gas and food prices in the U.S. and around the world.