Celebrities, European Leaders Push for Final Deal on Wall Street Tax

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This post first appeared on the Institute for Policy Studies blog.

If you love Harry Potter, zombies, European art house films or thumbing your nose at the big banks, you’ll love the new video promoting a Wall Street tax.

This is the first time, in my recollection, that major celebrities have ever showed a united front against the mighty financial industry lobby. The director is David Yates, who made the last four Harry Potter movies. Andrew Lincoln, the star of the hit zombie series The Walking Dead, and Bill Nighy, of The Best Exotic Marigold Hotel and Love, Actually, are among the actors.

Wall Street lobbyists will hate the film because it portrays a newscast 10 years from now in which a panel of bankers rave about the multitudinous benefits their countries have enjoyed as a result of a small tax on trades of stock and derivatives. The only panelist who’s decidedly not over the moon is Nighy, who plays a banker from the UK, which did not adopt the tax.

The viral video is one more setback for the financial industry lobbyists who have been madly trying to block progress on such taxes. In Europe, they seem to be losing the battle.

At a February 19 press conference in Paris, German Chancellor Angela Merkel and French President Hollande confirmed that a coalition of 11 EU governments are on track to finalize a coordinated financial transaction tax before May. European elections are that month, and this is considered a sure vote-getter. The latest Euro-barometer survey shows 82 percent of German and 72 percent of French citizens support it.

There have been hints, however, that the tax could be a watered-down version of the initial European Commission proposal. That original plan would place a tax of 0.1 percent on stock and bond trades and 0.01 percent on derivatives. Expected revenues: 31 billion euros ($US 42 billion) per year.

In a recent speech, EU Tax Commissioner Algirdas Šemeta indicated that negotiators are considering a graduated approach as a compromise. In the first phase, the tax would apply only to stock trades. In subsequent phases, it would be expanded to cover other instruments, including derivatives and possibly foreign exchange spot transactions.

German activist Peter Wahl feels this would be a bit of a setback but not the end of the world. “We could live with a two-step approach as a compromise under the condition that there is a binding timetable for the second step and that derivatives are included in the end,” he said.

Wahl, an analyst with the German group WEED, is one of the leaders of a diverse international campaign made up of labor, global health, climate and other groups that has driven the financial transaction tax (aka Robin Hood Tax) from the fringe to the center of global debates.

At her joint press conference with Hollande, Merkel predicted that “the minute things start to move forward other countries may be less reluctant and it could be expanded.”

European progress is likely to change the dynamic in the United States as well. The Obama administration is not yet supportive, but there is growing support in the US Congress.

Sen. Tom Harkin (D-IA) and Rep. Peter DeFazio (D-OR) have proposed a 0.03 percent tax on stock, bond and derivative trades, with a tax credit offset for contributions to qualified tax-favored accounts, such as 401(k) retirement funds. Rep. Keith Ellison (D-MN) has introduced the Inclusive Prosperity Act, which proposes tax rates of 0.5 percent on stock, 0.1 percent on bond and 0.005 percent on derivative trades, with an offset for taxpayers who make less than $50,000 per year.

The Joint Committee on Taxation estimates the Harkin-DeFazio proposal could raise $350 billion over 10 years.

There is also growing support among financial industry professionals who believe the small tax would be good for market stability. In a joint letter, more than 50 financial professionals wrote that “these taxes will rebalance financial markets away from a short-term trading mentality that has contributed to instability in our financial markets.”

RoseAnn DeMoro on the Robin Hood Tax
At a time when financial markets are dominated by computer-driven high frequency trading that has little benefit for the real economy, a tax of even a fraction of a percent could encourage longer-term sustainable investment.

At the end of the satirical video, the humiliated British banker lamely resorts to boasting about other occasions in which the Brits were not behind the curve, namely the Beatles and soccer. I suppose American bankers could come up with a few examples of their own. A better response to the growing momentum behind the financial transaction tax would be to just get on board.

Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies and is the co-author of the new report “Platinum-Plated Pensions: The Retirement Fortunes of CEOs Who Want to Cut Your Social Security.”
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  • http://www.facebook.com/RPManke.solar RevPhil Manke

    Early opinion has it that the stock and derivatives market could easily sustain a 1% tax instead of the .1% proposed. I’d like to see .5% tax at least!

  • Todd Eric Prifogle

    Why not the larger the amount involved the larger the tax , Say ranging from 1% to 5%. In the U.S. concerning the income tax, logic is reversed, the more you make the less you pay. Warren buffet’ secretary pays more tax than he does.

  • Anonymous

    the FTT as written will be included as a business expense, and raise even further the amount these suckers don’t pay in taxes. to be a true robin hood tax it should not be included as a business expense, and not transferrable or a hidden charge to the customers, and it should apply to individual trades not bundles of trades.

  • Jerry Squarey

    I think it should be a straight tax, an excise tax, much like tobacco, alcohol, and gasoline. I would think 5 cents a share would be a fair amount. A 10% tax on the derivative market would be fair. It’s hard to think of anything in this country that doesn’t have a point of sale tax on it. Why should the financial markets be any different?

  • JoeMcIntyre

    Income taxes are not necessarily regressive, though welfare cutoffs for some programs do create “real” tax rates that are quite high on the poor if they increase their income past the threshold.

    The low tax rates are on capital gains, which is why Warren Buffet was being dishonest when he made that statement in support of an income tax increase. It wouldn’t have affected his bottom line much.

    It should be noted that low capital gains taxes aren’t unique to the US either, in fact some European countries have abolished them outright. What makes the US unique is the scope of the financial markets, and the questionable benefits that many investments have.

  • ALEC-2 Webmaster

    And make it retroactive to the beginning of the derivatives trades, paying back all that homeowners lost in Wall Street’s gambling spree — and then some.