Europeans Move Forward On A Robin Hood Tax On Financial Transactions-- U.K. And U.S... Dragging Their Feet
In December the European Parliament voted overwhelmingly in favor of the kind of financial transaction tax Wall Street has bribed conservatives in America to reject. And on Tuesday E.U. Finance Ministers OK-ed the new tax which will cover inter-bank trading in stocks, bonds and derivatives, something that's expected to bring in over $50 billion dollars in revenues in 2014 when it's up and rolling. There's a 0.1 per cent tax on stock and bond transactions and a 0.01 per cent tax on derivatives trades. David Cameron, who shares the distinction with Paul Ryan of being a deranged advocate of bone-crunching Austerity, has kept Britain from participating.
Just as David Cameron appeared to be grabbing his coat for an EU exit, other European countries took a step towards greater unity with agreement for eleven countries to implement a multi-billion pound tax on the banks.American efforts to do the same thing were defeated by Wall Street and their allies in 2011. But Pete DeFazio (D-OR) and Tom Harkin (D-IA) are going to try again, hoping to institute a minuscule o.o3% tax on some financial transactions that will yield something like $35 billion dollars a year.
Not tax rises on low income families, or cuts to public services to balance the books, but a tax on banks. It's not every day you get to write that. The eleven hope that the Financial Transaction Tax of between 0.1-0.01 per cent on stocks, bonds and derivatives could be implemented as early as next year and will raise around £30bn.
The FTT has for years stirred controversy. Banks, following the Mayan's lead, warned that the end of the world was nigh. As campaigners for a Robin Hood Tax we have often been told "you may have a nice video with Bill Nighy in it [see video above], but your idea won't wash in the complex world of finance, nor will it cut it at the coalface of Government."
Yet it has-- Europe's biggest economies including France, Germany, Italy and Spain are signed up. The group of eleven makes up an impressive 90 percent of Eurozone GDP. Other European nations agreed to let them press ahead. Yet there was one notable abstention, from the UK Government.
Why? It could be argued that a right of centre Government, a powerful financial sector and an economy struggling to return to growth would never add up to much of an appetite to take a chunk out of the banks. Yet all of this applies to Germany, one of the FTT's biggest champions.
The difference is that Germany sees the FTT as a necessary part of the economic equation. It too is implementing tough austerity measures. Germany understands the need to balance and indeed improve the economy by ensuring the financial sector pays its fair share. The richest sector in the world, paying a modest additional tax for causing the largest financial crisis of a generation: quid pro quo.
As Wolfgang Schauble, German finance minister said:
It’s in the interest of the financial sector itself that it should concentrate more on its proper role of financing the real economy and ensuring that capital is allocated in the most intelligent way, instead of banks conducting the bulk of their trading on their own account. That’s in the long-term interest of the financial sector.Cameron, conversely, opted to call the Financial Transaction Tax "madness," fighting hammer and tong to protect the hallowed elite in the City, whilst cutting benefits and services for the poorest. The Government's much touted bank levy, will raise a just £2.5bn a year and be offset by a lowering of Corporation Tax that Osborne has boasted will be the lowest of any major western economy.
Mervyn King, Governor of the Bank of England pointed out the irony that "the price of the financial crisis is being borne by people who did absolutely nothing to cause it," adding that he was "surprised that the degree of public anger has not been greater than it has."
But if the moral argument doesn't sway you, then the fiscal case should. Leading City figure Avinash Persaud has calculated that if the UK were to join in with the European Financial Transaction Tax it would raise the Exchequer at least £8bn a year. This could lift over three million people struggling on minimum pay above the living wage threshold.
Ten thousand teachers lost their jobs in 2010/2011 and there are 5,780 fewer nurses than at the time of the last general election-- in eleven days an FTT could raise enough revenue to re-employ every one. In just a single day the tax could raise enough money to reinstate Sure Start centres for 25,000 children.
A financial transactions tax would slow down high-frequency trading, which has exploded in the last five years. Such trading “has absolutely no social value,” according to one of its pioneers, and only increases volatility in the market. The tax would have little effect on normal traders.And in response to Wall Street traders claiming "businesses" would move elsewhere-- Dubai? Beijing? Somalia?-- DeFazio has pointed out that 52 financial executives have endorsed the tax and rejected the scare tactics. “For 50 years we had a tax that was about seven times larger than this when the country was seeing the greatest growth in its history, post-World War II,” he said. “So we’ve proven this will not have a detrimental impact on growth. In fact, it perhaps is beneficial to growth. It’s not necessarily beneficial to salaries of hedge fund managers on Wall Street.”
And, it turns out, DeFazio and Harkin aren't the only Members of Congress talking about a financial transaction tax. Boehner pawn Dave Camp (R-MI), chairman of the House Ways and Means Committee is reportedly about to introduce some kind of twisted, partisan version of the tax, that smacks of Republican revenge against businessmen asking them to cooperate with Democrats for the sake of the country.
The draft legislation, which may get significant revision before it's presented to a congressional committee, would be vehemently opposed by Wall Street and other major corporations that trade heavily in derivative securities.
Sleazy Boehner ally Dave Camp (R-MI)
They may have only themselves to blame. Congressional Republicans have been furious at top corporate executives lobbying heavily for a "grand bargain" that would include tax hikes and cuts to Social Security, Medicare and Medicaid, according to congressional GOP insiders. Republican leaders were further piqued when business executives began lobbying for certain corporate tax reforms, leading to a sharply worded letter from Camp to the Business Roundtable, a lobbying group of corporate CEOs.
One Republican operative told HuffPost that Camp's bill is political payback for the CEOs collaborating with the Fix the Debt coalition, which worked with corporate chiefs who had pressured Republicans to accept tax increases as part of a deal to avert the so-called fiscal cliff at the close of 2012.
"This transaction tax was only a matter of time after Camp's letter to the Business Roundtable," the GOP operative said. "In just a few months, their lobbying campaign has resulted in Republicans initiating new revenues on their backs. Maybe the CEOs can kill it by Democrats insisting the taxes aren't high enough."
...Camp's new bill would harvest government revenues from complex financial transactions involving derivatives, some of which figured prominently in the 2008 banking collapse. Although the 2010 financial reform legislation would curb some excesses in the derivatives market, the legislation isn't yet fully implemented, and leaves much of the market unregulated. Financial reform advocates have urged new taxes on derivatives to deter excessive risk-taking by big banks.
...Camp's bill would establish a new tax regime for derivatives, requiring banks to declare the fair market value of the products at the end of each year. Any increase in value would be considered corporate income, subject to taxation. It's a more aggressive tax treatment than Wall Street enjoys for either derivatives or for trading in more traditional securities.
...The bill would significantly strengthen the Volcker Rule, which bans banks from speculating in securities markets with taxpayer money. The Volcker Rule's implementation has been delayed as bank lobbyists have flooded regulatory agencies in Washington, pillorying the ban with loopholes. Hefty tax burdens for proprietary trading would reduce bank incentives to engage in the risky activity.
Camp's legislation also would permanently establish a homeowner aid plan advocated by former Rep. Brad Miller (D-N.C.), who retired this month. When banks grant homeowners mortgage relief, the IRS considers the debt-reduction taxable income. As a result, struggling homeowners can face an unmanageable tax burden. A $50,000 debt reduction can spark an $18,000 tax bill-- money that borrowers struggling to avoid foreclosure simply do not have. Miller successfully lobbied to include a one-year fix on the tax policy in the fiscal cliff deal. Camp's legislation would permanently end the tax policy.