![]() High-frequency trading is so complex that almost no one truly understands how it works, and small mistakes can produce huge losses within minutes-so-called “ flash crashes” that happen too fast for humans to react to before the damage is done. About 18 percent of stock transactions take place in alternative systems, including so-called “ dark pools“-where trades are hidden from public view-and a whopping 50 percent are executed by high-frequency robot traders that can make thousands of tiny trades every second. That’s a tax of only 50 cents on a $100 stock transaction and a dime on a $100 bond sale-and it would be even less than that if we stayed closer to 0.1 percent on stocks, as many progressive economists recommend.īut the benefit of taxing these instruments goes beyond raising revenue. Sanders, for example, has proposed a rate of 0.5 percent for stocks and 0.1 percent for bonds. What’s more, since their volume of trade is so large, the tax rate can be very, very low. Stocks and bonds are pretty easy: They have a clear-cut market value and their sales are tracked and reported in a transparent way. Generally speaking, the biggest components of the financial market are stocks, bonds, and derivatives, so that’s what you want to tax. You just have to decide exactly which financial transactions to tax, and you have to decide how high the tax rate should be. That might go a long way toward uniting the Democratic Party in the campaign against Donald Trump this fall.ĭo I have your attention yet? The devil, as usual, is in the details, but the details behind an FTT aren’t really very complicated. Adopting his position not only would be the right thing for Clinton to do, but could help persuade Sanders’ army of fans that she’s not the water carrier for Goldman Sachs that so many of them think she is. Both Bernie Sanders and Hillary Clinton endorsed an FTT, but Sanders’ proposal covered a broader array of transactions. We could raise billions of dollars a year if we put a stop to this special treatment and enacted a financial transaction tax.īeyond raising badly needed revenue, there’s a potential political benefit too. ![]() If you buy a credit default swap, you don’t. Thanks to the clout of Wall Street, one of the few financial transactions we don’t tax in America are…financial transactions themselves. But what if there were a sales tax at the national level that raised a lot of money efficiently and hit the rich harder than the poor? This is no fantasy. That’s pretty damn regressive.Īdopting Sanders’ position not only would be the right thing for Clinton to do, but could help persuade his army of fans that she’s not the water carrier for Goldman Sachs that so many of them think she is. According to ITEP, the working poor in Washington pay 12.6 percent of their family income in sales taxes. Last year, it claimed Washington had the most unfair tax system in the country, largely because the state, which lacks an income tax, raises nearly half its revenue from sales taxes. “Sales and excise taxes are the most regressive element in most state and local tax systems,” says the Institute on Taxation and Economic Policy, which examines state tax systems every year. ![]() In particular, they hit the poor quite hard. What’s more, because sales taxes are part of the broad family of consumption taxes, economists say they’re relatively efficient.īut they aren’t perfect. And why not? Sales taxes are simple and cheap to collect, they raise a lot of money, and they’re pretty easy on consumers since we end up paying in tiny increments that are generally fairly painless. We’re all so used to the idea that it seems completely natural. ![]() Unless you’re one of the lucky few who live in Delaware, Montana, New Hampshire, or Oregon, you pay a sales tax on almost everything you buy. Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.
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