Public Citizen, A Progressive Tax With Beneficial Effects:
A Small Levy on Financial Transactions Would Steer Clear of Struggling Americans, Raise Meaningful Revenue, and Possibly Retire An Abusive Wall Street Industry
A small tax on financial transactions, such as a one-tenth of 1 percent levy on the purchase of stocks and bonds, would likely end the viability of high-frequency trading while raising consequential sums for the U.S. Treasury. Opponents of this proposal have claimed it would hinder the ability of middle-class families to save for retirement. In contrast, we conclude that the costs of a modest financial transaction tax (FTT) would be little to nothing for middle-income families and would be easily manageable for average families in top income bracket.
A financial transaction tax, such as the one proposed in the Wall Street Tax Act, has the potential to raise meaningful amounts of revenue with minimal impact on ordinary Americans. Even its prospective effect on average families in the top income tier is not particularly onerous.
Slamming the breaks on high-speed trading would good for just about all Americans except for those who benefit by treating Wall Street like a casino. Faced with the prospect of less action, Wall Street’s croupiers will warn of harms to ordinary Americans from an FTT. Evaluators of those forecasts should consider the industry’s incentives.
Those who endorse the concept of a more progressive tax code, meanwhile, should find much to like in a financial transaction tax because it would apply roughly proportionately to families’ holdings in securities, and those holdings disproportionately belong to the wealthiest Americans.
Critics of proposed public investments – such as those to improve the nation’s health, increase access to education, and address climate change – often base their opposition on affordability grounds. A financial transaction tax would offer a way to make a down payment on long-term investments in the nation’s welfare that would be paid almost entirely by those who clearly can afford it.