Musings From the Margin

Passing thoughts from exile.

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Location: Silicon Valley, United States

Saturday, September 20, 2008

It's time to Tax the Speculators, according to Chuck Collins, in The Nation:

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...what happens when a whole sector of the economy has been cooked and billions of dollars have...been stashed in offshore bank accounts? How are the crooks held accountable for robbing our entire economy?

Here are six actions that will fairly generate over $400 billion a year to pay for a broad-based economic recovery and reduce the extreme inequalities that fueled speculation at the outset.

Institute a Financial Transactions Tax. Congress should levy a tax on financial transactions such as sale and purchase of stock and more exotic transactions such as credit default swaps, options, and futures. The UK has a modest financial transaction tax of 0.25 percent, a penny on every $4 invested. This is negligible for a long-term investor, but imposes a cost on the fast-buck flippers. Estimated annual revenue: $100 billion.

Impose an Income Tax Surcharge Rate on Incomes Over $5 Million. The 50,000 households with annual incomes over $5 million are the bigger winners from twenty-five years of Wall Street deregulation. They've also seen their effective tax rates decline under President George W. Bush. Instituting a 50percent tax rate surcharge on incomes over $5 million and a 70 percent rate on incomes over $10 million would generate $105 billion a year.

Eliminate the Tax Preference for Capital Gains. Wealth extracted from Wall Street windfalls will pay out income for years to come. There's no economic reason for taxing income from corporate dividends and capital gains at 15 percent while taxing income from actual work at 35 percent. Taxing wealth and work at the same rates would generate $95 billion a year in revenue.

Progressive Inheritance Taxes. When great a amount of wealth passes to the next generation, a portion of it should be taxed. A progressive estate tax could generate $50 billion a year in the short term, but much more in outlying decades.

Eliminate Taxpayer Subsidies for Excessive CEO Pay. Five loopholes that benefit top executives should be abolished. These include eliminating offshore deferred compensation, capping the tax deductibility of excessive pay and eliminating double standards for stock option accounting. Closing these tax loopholes would generate $20 billion a year. (Read more about this in this recent report from the Institute for Policy Studies and United for a Fair Economy.)

Close Offshore Corporate Tax Havens. Congress should prevent corporations from playing games by claiming expenses in the United States and profits in countries that don't collect taxes. According to the Government Accountability Office, two-thirds of US corporations paid no corporate income tax between 1998 and 2005. Closing this loophole would generate over $100 billion.

Government action should prioritize protecting ordinary people and the real productive economy, not further reward the super-rich and the speculative sectors of the economy. A fair plan to the pay for the recovery is a good start.

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