Ralph Nader has written a very good OpEd in the Washington Post on taxing stock trades. I fully expect that Dean Baker will write about this tomorrow, because this is one of his big issues. But I thought Nader laid out the case very well. The basic idea is that the government would levy a 0.5% tax on all financial trades.
There are many reasons why this is a good idea. What I most like about it is that it would put a serious dent into the practice of micro-trades. These are high speed trades done by computers. These not only don’t do what trades are supposed to do: get money from those who want to invest to businesses that need capital. They are often actively harmful and pose a constant risk of disaster. I know far too much about computers and programming to feel comfortable with this practice.
Nader points out that the United States had such a tax from 1914 through 1966. So what’s the big deal? The big deal is that stock traders don’t want this kind of thing because it would cut into their profits. And stock traders have a lot of money, so the government is very likely to listen to them. But as Nader notes, we already have taxes on regular economic transactions. Here in California, this tax is at least 7.25% and where I live it is 8.5%. There is no similar tax on stock trades, even though they are the in no way different.
A report from the Political Economy Research Institute (pdf) indicates that such a tax could raise as much as $350 billion annually. That’s over 10% of the total projected revenue for 2013. Compare this to the $11 billion that would be generated by raising the Medicare eligibility age.
I recommend reading the whole article. It isn’t long and it is very clear. Nader deals with all the possible criticisms of the idea and discusses its main advantages. It is a great idea. And thus, both Washington and the mainstream media will likely treat it with the aggressive indifference they treat every idea that rich people don’t like.