Dean Baker: Bernie Sanders Takes It to Wall Street With Financial Transactions Tax - HuffPo

[WillyT]

Bernie Sanders Takes It to Wall Street With Financial Transactions Tax
Dean Baker - HuffPo
Posted: 05/25/2015 8:45 pm EDT Updated: 05/25/2015 11:59 pm EDT

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Last week, Bernie Sanders, the Senator from Vermont and only announced challenger to Hillary Clinton for the Democratic nomination, took a strong stand for everyday people. He proposed a financial transactions tax (FTT), effectively a Wall Street sales tax, and to use the revenue to make public colleges tuition free.

While making college affordable to low and middle income families is important, the proposal for an FTT is a real game changer. There is no single policy that would have anywhere near as much impact in reforming the financial sector. A FTT would effectively impose a sales tax on stocks and other financial assets, so that speculators have to pay a tax on their trades, just like people who buy shoes or clothes.

There are three points people should understand about a FTT. The first is that it can raise an enormous amount of money. A FTT could be imposed at different rates. Sanders proposed following the rate structure in a bill put forward by Minneapolis Congressman Keith Ellison. Eleven countries in the European Union are working to implement a set of FTTs that would tax stock trades at a rate of 0.1 percent and trades of most derivative instruments at the rate of 0.01 percent.

Extrapolating from a recent analysis of the European proposal, a comparable tax in the United States would raise more than $130 billion a year or more than $1.5 trillion over the next decade. This is real money; it dwarfs the sums that have dominated most budget debates in recent years. For example, the Republicans had been trying to push through cuts to the food stamp program of $40 billion over the course of a decade. The sum that can be raised by this FTT proposal is more than thirty times as large. The revenue from a FTT could go far toward rebuilding the infrastructure, improving the health care system, or paying for college tuition, as suggested by Senator Sanders.

The second point is that Wall Street will bear almost the entire cost of the tax. The financial industry is surely already paying for studies showing the tax will wipe out the 401(k)s held by middle income families. This is nonsense. Not only is the size of the tax small for anyone not flipping stock on a daily basis, research indicates that most investors will largely offset the cost of the tax by trading less.

Most research shows that trading volume falls roughly in proportion to the increase in transaction costs. This means...

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More: http://www.huffingtonpost.com/dean-baker/bernie-sanders-takes-it-t_b_7438808.html

[nashville_brook]

1. so reasonable.

[BrotherIvan]

2. I'm sure our resident propagandists will start screaming about 401ks

But this proposal is one that liberals have been waiting for. It's something the American people can get behind and the fact that it is tied to education is even better. This is a real, concrete solution, not platitudes.

[Go Vols]

3. K&R