By Mark S. Mellman - 02/20/13 12:34 AM EST
In just over a week, massive, across-the-board cuts will hit first-responders and soldiers, kids in schools and patients in hospitals. They needn’t.
Reasonable people recognize that the country suffers from both a spending and a revenue problem. Federal receipts, mainly taxes, as a percentage of gross domestic product were lower each year between 2009 and 2012 than in any year since 1950. That is, the federal government took in less, as a percentage of the economy, than it had in six decades — taking in less under President Obama than under Republicans George W. Bush, Ronald Reagan or Richard Nixon.
Yet, Americans don’t feel under-taxed — 46 percent feel they pay too much in taxes, while 47 percent believe they pay the right amount and just 3 percent are looking for a tax increase.
However, taxes on individuals aren’t the only source of the additional revenue required to prevent the draconian cuts Republicans and Democrats both voted for in the 2011 debt-limit agreement.
There is broad public support for a financial transactions tax. Nearly two-thirds (64 percent) favor “a financial transactions tax ... of about one-half of a percent on each financial transaction undertaken ... such as trading stocks, bonds, derivatives, futures, options, or credit default swaps. The transactions of everyday consumers, such as using an ATM machine or depositing a check, would not be taxed.” Only about a quarter opposed this tax in a poll The Mellman Group conducted for Friends of the Earth. Even Republicans favored the tax, albeit by a narrow margin.
These results mirror those generated last year in response to a different version of the question, which found 63 percent of Americans supporting a financial transactions tax.
It’s hardly a radical idea. The United States collected a tax on the transfer of stock from 1914 through 1966. Eleven countries of the European Union are poised to institute such a tax and some 30 countries already do, including the U.K.
Revenue estimates from such a tax in the U.S. range from $175 billion to $1.2 trillion per year. Thus, at the low end, the tax would produce enough deficit reduction to meet the terms of the debt-limit agreement with no additional cuts. No further cuts would be needed to domestic spending and no further cuts to defense spending — all from one tax that doesn’t touch average folks. Pretty attractive.
Moreover, the tax would reduce the incentives for the kind of market speculation that helped crash our economy.
Of course, someone’s ox will be gored, and they’ll put up a tough fight. We gave voters in the poll tough arguments against the tax (some of which just aren’t true), saying: “...while it is designed to punish Wall Street, the real losers would be on Main Street. Taxing the sale of stock would cut dividend payments and push the stock market down by more than 10 percent, hurting every 401(k) in America. Instead of doubling the cost of buying or selling stock, including stocks purchased on your behalf by mutual funds, we should focus on making our markets more efficient and more transparent, not more expensive.” This was juxtaposed with an argument in favor of the tax, explaining that “... dozens of countries have instituted similar plans. ... By discouraging so-called high frequency trading ... [it] will reduce dangerous financial market speculation and encourage longer-term investment, all while having no impact on consumers’ everyday bank transactions like writing a check or withdrawing money from an ATM machine.” Sixty-two percent still supported the tax, and 30 percent opposed it, a 2-to-1 margin.
While it’s been introduced in both houses, it’s surprising that such a clean solution has been given such little attention.
Mellman is president of The Mellman Group and has worked for Democratic candidates and causes since 1982. Current clients include the majority leader of the Senate and the Democratic whip in the House.