The continuing instability in the world economy is at least partly due to the fact that financial markets are still out of control. Wall Street traders are reaping billions on short term speculation, while our economy remains stagnant. As an economist, I know that building a strong, sustainable economy depends on doing something about a bloated and unruly financial sector.
To help get markets back under control, one important policy tool is a targeted tax on Wall Street trading.1Please join me in signing this petition to keep pressure on Congress to pass such a tax.
The Wall Street Tax serves at least three important economic policy goals.
First, the Wall Street Tax would raise much-needed tax revenue2 without raising taxes on workers at all. Ten-year estimates range from $400 billion (the Harkin-DeFazio bill introduced last month) to $1.3 trillion in new tax revenue. That revenue can be used to grow our economy and create jobs.
Second, like a vice tax on cigarettes or gambling, the Wall Street Tax discourages activity that is unhealthy for our financial markets. Traders make billions on speculation that leads to quick rises and steep drops in the market that have little to do with how well the economy is doing. This can lead to huge bubbles in oil prices3, or it can send stock prices plummeting based on a computer glitch. With a tax, we discourage that sort of short-term trading.
Finally, the tax would make financial markets more efficient by helping businesses raise capital without all of the inefficiencies that come from an oversized financial sector. The multi-million dollar bonuses of Wall Street executives are a direct drain on the rest of the economy. The money that is currently wasted in the financial sector could instead be used to help businesses grow and create jobs.
Will you sign the petition?
Wall Street is putting up enormous opposition to this tax, because it would change the way Wall Street does business, forcing it to serve the productive economy by lending to businesses, homeowners, and students, rather than playing games with complex financial instruments.
Great Britain has had a tax on stock trades for hundreds of years4, and the London Stock Exchange remains strong and vibrant. Germany, the industrial world's leading exporter, is considering a similar tax too.5
While it may seem like a tax faces a stiff headwind here in the United States, good policy can make for good politics. And, importantly, a robust push for such a tax in the United States could strengthen efforts in Europe where progress might be more imminent. Indeed, European leaders have cited a lack of such a push here in America as a reason for their own inaction.
I hope you can join me in supporting the Wall Street Tax. Please sign the petition to Congress.
Thanks for all you do.
The Rebuild Team