The proposal is actually a well-accepted concept: a very small levy of less than one-half of one percent on transactions of Wall Street, big banks, and large investment firms. These include trades such as derivatives, bonds, foreign currency, and stocks. It’s supported not only by Congressman Ellison, but also an ever-growing coalition of charities, labor groups, and advocacy organizations who recognize the potential gains for a range of domestic and global challenges.
The FTT itself wouldn’t directly affect ordinary Americans. No new bank fees, no hit to your savings or the growth of your investments. It’s applied only to the institutions themselves, not the individuals involved.
However, it would indirectly impact millions of Americans, and many millions of people around the world. Economists estimate that this tax on the US financial sector would generate between $177 billion and $350 billion in the United States each year. A conservative estimate is that, over ten years, the FTT could result in revenues of $1.7 trillion.
This revenue would address important social needs, including education, job training, and poverty reduction worldwide. All this without American taxpayers contributing more, without Congress doing constant battle to decide which programs warrant new funding and at whose cost, and without Wall Street suffering any real consequences, either.
In fact, economists suggest benefits to our financial system, arguing that the tax would curb excessive speculation and provide stability to the market. It isn’t a new idea, or a particularly radical one. The Financial Transaction Tax was popularized in 1978 by James Tobin, an American Nobel Prize-winning economist; in his honor, the FTT is also sometimes called a Tobin Tax. Momentum around this concept has grown since, with France, Brazil, Argentina, and Germany in support. Last year, 10 members of the European Union agreed to a Robin Hood Tax, in part hoping the extra revenue for the EU budget could limit the burden on individual countries and spur emergence from recession.
The FTT as designed by Congressman Ellison and the US Robin Hood Tax Campaign would help to pay for basic improvements to life at home and in the world’s poorest countries. One beneficiary would be safe drinking water, sanitation and hygiene as a key element of global health.
The sanitation target of the Millennium Development Goals (MDG), to halve the proportion of people living without access to basic sanitation, is one of the most off-track of all international development goals, with 40% of the world’s population lacking access. According to the WHO, expanding existing sanitation coverage in order to meet the MDG target would cost just $23 billion per year. This is a fraction of the total revenue that could be generated by the proposed FTT.
The same WHO study projected a $54 billion annual economic benefit from meeting this sanitation target. Then there are the millions of children who would be healthier, have more opportunity for an education, and even benefit from increased stability in the global food market, since it is predicted that commodity speculation would be contained by the tax itself. Together with US jobs creation and investments in health and education, increased US support for basic sanitation would yield a huge benefit for everyone, without additional inputs from any of us.
Last month, in context of the fiscal cliff talks, I wrote about how foreign aid is everyone’s responsibility. The lack of a comprehensive resolution to our fiscal woes highlights the need for serious—and creative—conversations about how the financial sector could be included to broaden the tax base, increase revenue, and fill the funding gaps for international development and other critical inputs to make our country and our world safer and more prosperous. Now is the time to ensure Robin Hood is part of the dialogue, and the solution.