Wall Street is an eight-block-long street running roughly northwest to southeast from Broadway to South Street, at the East River, in the Financial District of Lower Manhattan in New York City. Over time, the term has become a metonym for the financial markets of the United States as a whole, the American financial services industry (even if financial firms are not physically located there), or New York–based financial interests.
Anchored by Wall Street, New York City has been called both the most economically powerful city and the leading financial center of the world, and the city is home to the world’s two largest stock exchanges by total market capitalization, the New York Stock Exchange and NASDAQ. Several other major exchanges have or had headquarters in the Wall Street area, including the New York Mercantile Exchange, the New York Board of Trade, and the former American Stock Exchange.
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The six largest banks in America have more than $10 trillion in assets, more than 50 percent of our nation’s GDP. Today the four largest financial institutions— JPMorgan Chase, Bank of America, Wells Fargo, and Citigroup—are on average 77% bigger than they were before we bailed them out. No single financial institution should be so large that its failure would cause catastrophic risk to millions of Americans or to our nation’s economic well-being. Further, we should not just be concerned about the danger these institutions pose to taxpayers. The enormous concentration of ownership within the financial sector is hurting the middle class and damaging the economy by limiting choices and raising prices for consumers and small businesses. We must:
- Break up too-big-to-fail banks.
- End the too-big-to-jail doctrine.
- Reinstate the Glass-Steagall Act.
- Cap credit card interest rates.
- Allow every post office to offer basic and affordable banking services.
- Cap ATM fees.
- Audit the Federal Reserve and make it a more democratic institution so that it becomes responsive to the needs of ordinary Americans, not just the billionaires on Wall Street.
- Restrict rapid-fire financial speculation with a financial transactions tax.
- Reform credit rating agencies.
- https://berniesanders.com/issues/real-wall-street-reform/
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It was more than a decade ago when Wall Street recklessness crashed the economy but some hardworking families are still struggling to regain their footing. And, racial minorities– who have unfortunately historically had less wealth– remain the hardest-hit after the financial crisis. Yet banks are making record profits and cashing in from the huge tax windfalls they received in 2017, along with other corporations and the wealthy. The reduced revenues coming in to the government because of the 2017 tax giveaway means that needed investments in infrastructure, public education, or expanding access to health care are not likely to happen. Worse, the Trump Administration and conservatives in Congress will continue to call for cuts to existing spending levels for Medicare, Medicaid, Social Security, nutrition assistance for seniors, and on and on as a way to address growing government budget deficits.
Public Citizen is focused on unrigging our tax code and reinvesting the revenues into communities across the country as part of the answer to addressing the many obstacles to success currently facing Americans and to minimizing economic inequality everywhere. Unrigging the tax system means more than taxing the superrich or undoing the corporate giveaways in the 2017 tax law, which can and should be part of the solution. But, the tax debate also must focus on making Wall Street high rollers pay their fair share by putting a sales tax on financial transactions like stock, bond and derivative trades.
The Wall Street sales tax (also known as a financial transaction tax, speculation tax, Robin Hood tax, or Tobin tax) is a tiny fee – at rates ranging from a few pennies to fifty cents per hundred dollars of trading– on purchases of financial instruments such as stocks, bonds, and derivatives. Depending on the rate at which it is set, Wall Street sales tax would raise at least tens of billions of dollars per year in badly needed revenue. According to 2018 government estimates, a fee of only 10 cents per every $100 traded would raise nearly $777 billion over 10 years. Proposals for a higher tax rate would generate even greater amounts. This money could be spent on needs like infrastructure and education, expanded health care, child care and mitigating climate change.
More than just a revenue generator, though, a sales tax on Wall Street trades has other benefits. For instance, it would tamp down high-frequency trading, the superfast computer trading that has overtaken the market. High-speed trading contributes to market instability, including the dangerous trillion-dollar “flash crash” of May 2010 when the Dow Jones lost about 10 percent of its value in 10 minutes, before ultimately rebounding.
Moreover, high-speed trading firms are profitable because their computer algorithms are able to make trades a split second faster than the competition, raising costs for everyone else. So, putting a tiny tax on trading will steer activity away from these investment strategies that narrowly chase short-term gains over long-term value creation. The Nobel-winning economist James Tobin called the effect of the tax “throwing sand in the wheels” of the market to slow speculation. That’s why in 2016 the Democratic Party Platform included a plank on taxing Wall Street trades as a way to “to curb excessive speculation and high-frequency trading, which has threatened financial markets.” Instead of the emphasis on computer trading that drives instability, a better path for our markets would be to incentivize the type of investments that put capital to work growing jobs in brick and mortar companies.
Given the many benefits from these types of taxes, it’s not surprising that around 40 other countries have implemented them. In fact, the U.S. already has a very tiny trading fee in place that funds some of the operations of the U.S. Securities and Exchange Commission. The Wall Street sales tax bills introduced in Congress are basically just a more robust, expanded version of an existing user fee.
Because the legislation calls for the tax to be paid for by brokers and trading exchanges, (though they will likely pass it on to investors) it’s not surprising that Wall Street and its huge lobby corps strongly oppose reinstating a robust tax on U.S. trades. To try to keep the policy from moving forward, Wall Street spreads a lot of myths about the potential impacts of a Wall Street Sales Tax– claims that can easily be refuted.
Myth 1: The tax will mostly be paid by retirement investors.
The truth instead is that the Wall Street sales tax is very progressive—three-quarters of the revenues from a .1 percent Wall Street sales tax would come from top 20 percent of society and 40 percent would be paid by the top 1%. Retirement investors would barely notice such a tax since they already pay far more in exchange fees, clearing fees, fund management fees, and other costs associated with investing than they would pay under a Wall Street sales tax. And, as their funds trade less as a result of the tax, retirement savers’ portfolios will ultimately fare better due to less churn and fewer overall fees. Also, the tax will improve markets for average investors by decreasing the volatility from high-frequency trading and will put an end to the arbitrage made possible by high-speed computer trading. Additionally, by increasing government revenue, the tax would safeguard retirement programs like Social Security and Medicare and would broadly support the economy by encouraging longer-term investments, creating good-paying jobs.
Myth 2: It will never work.
This argument ignores the fact that many other nations have already successfully implemented financial transaction taxes. For example, the United Kingdom’s stamp duty on stock trades has been in place for hundreds of years. We’ve even taxed Wall Street trades here in America. From 1914 until 1966 the United States had a transfer tax—a small fee on all sales or transfers of stock. And, we still have a very small trading fee in place, which is used to finance the Securities and Exchange Commission.
Myth 3: It’s too complicated.
The Wall Street sales tax is actually extremely simple: Ordinary people pay sales taxes on all manner of goods and services yet no such taxes apply to purchases of stocks, bonds, and derivatives. Putting a tax of a fraction of a percent on financial transactions is actually a really easy way to grow a lot of revenues to reinvest in American communities. And, compared to the package of tax loopholes and maze of giveaways to the wealthy and corporations rushed into law in 2017, a sales tax on Wall Street trades would be simple.
Tell Congress to Pass a Wall Street Sales Tax
Not only is a Wall Street sales tax popular with the public, it is supported by major business and political leaders like Bill Gates, Mark Cuban, and Warren Buffett, Sheila Bair, and Paul Volcker; as well as academics and economists like John Keynes, James Tobin, Paul Krugman, Joseph Stiglitz, Dean Baker, and Larry Summers. NOW is the time to unrig our tax code and put a sales tax on Wall Street trades. Please tell your U.S. Representative and Senators to pass the Wall Street Tax Act (S. 647/H.R. 1516) and the Inclusive Prosperity Act (S. 1587/H.R. 2923).
Michael Ruark 