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Home Publications Blogs Beat the Press The Washington Post Tells Us What the White House "Believes" About Financial Transactions Taxes

The Washington Post Tells Us What the White House "Believes" About Financial Transactions Taxes

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Saturday, 19 May 2012 22:13

In a blogpost discussing the push by many groups to get a financial transactions tax the Post told readers:

"The White House believes it would be easy to evade, could hamper economic growth, and might make markets more volatile, not less so. Instead, Obama has proposed a new 'financial crisis responsibility fee' on big banks, which would raise about $61 billion. "

While it is not clear how the Post knows what the White House really believes, what we know is that financial transactions taxes are apparently not that easy to evade. The tax in the UK, which applies only to stocks (not derivative instruments like credit default swaps, options, and futures) raises between 0.2 and 0.3 percent of GDP annually. This would be between $30-$45 billion a year in the United States. Unless we assume that the Obama administration thinks our tax collectors are much less competent than those in the UK, then they presumably do not really "believe" that the tax will be easy to evade.

The reference to economic growth refers to outdated research by the European Commission (EC). The most recent study by the EC shows that a tax would lead to somewhat more rapid growth if the money was used either to reduce other taxes or finance public investment.

If the White House has any evidence that the tax would increase volatility they are keeping it secret from the world. The tax would simply raise transactions costs back to where they were 10-15 years ago. Financial markets were not obviously more volatile in 1995 than they are today.

Finally, the "financial crisis responsibility fee" proposed by the Obama administration would raise an order of magnitude less tax revenue than the financial transactions taxes of the size generally being proposed. The Obama administration surely understands that they are pushing a tax that will have much less impact on the financial sector and will raise much less revenue than a financial transactions taxes.

The Post does not know what the White House "believes" about financial transactions taxes. It knows what it says about financial transactions taxes. While what it says may reflect what it believes, it may also reflect the fact that the administration is hoping to raise money for its re-election campaign from Wall Street. Also, many officials in the administration may hope to work on Wall Street after leaving the administration. These are the facts that we know.

Comments (4)Add Comment
A Few More Facts We Know
written by Robert Salzberg, May 20, 2012 4:14
   The U.K. uses a 'stamp' tax of 0.5% on trading of stocks.  The key flaw in the proposed FTT in DeFazio's bill is that it can be avoided by trading the stock on other exchanges outside the U.S.

    Congress could revise the proposed law so that like the U.K. tax, any trade of an American stock anywhere in the world is required to pay a 'doc' fee of 0.03% by both the buyer and the seller. 

   Khimm's piece fails to inform the reader of the scale of the proposed EU FTT which is 0.1% for stock transactions and 0.01% for derivatives.

   Khimm's blog post has no information about whether the SEC currently collects any transactions taxes at all.  The current SEC Section 31 transaction fee is $15 for every 1 million dollars traded or 0.0015%.


Khimm's blog post also fails to let us know that the estimated $61 billion raised by Obama's proposed fee is over a 10 year period.
Believing and hoping
written by Melissa, May 20, 2012 6:06
I think you're committing almost the same mind-reading sin that WAPO is, in your last paragraph. I don't think your use of "may" before "hope" gets you off the hook entirely, especially when you end the same paragraph with a claim about "these facts" (after all you could have made any kind of outlandish claim, disclaimed it with "may" and then called that claim a "fact"). Facts would be the evidence of actual past campaign contributions and revolving door hiring, which are indeed documentable for both parties.
"difficulty of tax collection"
written by A Populist, May 20, 2012 7:50
First, a response to Melissa: Yes, the format of Dean's comments have a mixture of cynicism, sarcasm, and allusions to facts and (I believe) reasonable assertions not specifically documented in this particular post. However, given that Obama raised the most campaign cash from Wall Street in the history of US Presidential elections ( and McCain raised a huge, but lesser amount), I believe it is a reasonable assertion that Obama would again like to raise massive cash from the same donors. As for revolving door cronies for Wall Street, it is well documented that Obama has given massive power (and key posts) to these guys all along. The interests of the hedge fund and banker community are intertwined with the interests of the politically powerful, because the sets intersect. This is election season, so you can't believe anything these guys say. Judging by actions and results is more rational.

Regarding the "difficulty of tax collection", it is always talked about in the abstract, and assumed that the reason is "smart accountants and lawyers retained by the rich". Of course, the real mechanism, are the loopholes purposely written into the law by our corrupt lawmakers, but that concrete and personal narrative is effective and persuasive, and therefore unacceptable in our public discourse.
...
written by JSeydl, May 20, 2012 8:29
Also, many officials in the administration may hope to work on Wall Street after leaving the administration.


Priceless quote.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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