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[Fwd: Ideas Whose Time Has Come Dept: AFL-CIO, Progressive Dems Push Stock Transfer Tax]

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  • Melvin Rothenberg
    THE HILL * * *[Note From CarlD: Watch the debate of this one if you want to see the division between speculative and productive capital,
    Message 1 of 1 , Sep 1, 2009
      THE HILL <http://thehill.com/>
      * *
      *[Note From CarlD: Watch the debate of this one if you want to see the
      division between speculative and productive capital, and between
      speculative capital and the people generally, reveal itself. It will
      also highlight the main adversary of the day and a major obstacle to
      dealing wisely with the economic crisis. For that reason, however, it
      may get shushed up without much debate.]*

      AFL-CIO, Dems push new Wall Street tax

      By Alexander Bolton - 08/30/09 10:17 AM ET

      The nation’s largest labor union and some allied Democrats are pushing a
      new tax that would hit big investment firms such as Goldman Sachs
      reaping billions of dollars in profits while the rest of the economy

      The AFL-CIO, one of the Democratic Party’s most powerful allies, would
      like to assess a small tax — about a tenth of a percent — on every stock

      Small and medium-sized investors would hardly notice such a tax, but
      major trading firms, such as Goldman, which reported $3.44 billion in
      profits during the second quarter of 2009, may see this as a significant
      threat to their profits.

      “It would have two benefits, raise a lot of revenue and discourage
      speculative financial activity,” said Thea Lee, policy director at the

      “The big disadvantage of most taxes is that they discourage some really
      productive activity,” she said. “This would discourage numerous
      financial transactions. People flip their assets several times in an
      hour or a day. They make money but does it really add to the productive
      base of the United States?”

      Lee said that taxing every stock transaction a tenth of a percent could
      raise between $50 billion and $100 billion per year, which could be used
      to pay for infrastructure projects and other spending priorities. She
      said the tax could be applied nationwide or internationally.

      The proposal would hit especially hard those hedge funds and large banks
      earning hefty profits despite the shaky economy from a practice known as
      high-frequency trading. High-frequency traders use powerful computers to
      conduct hundreds of thousands of orders in mere seconds, taking
      advantage of slower traders.

      Only the biggest investment firms can afford to develop the technology,
      which delivers handsome profits at little risk. The growing popularity
      of the practice has contributed to the soaring volume of trades on Wall
      Street in recent years and, some critics argue, market volatility and
      rampant speculation.

      High-frequency trading is estimated to earn about $20 billion in profits
      for the nation’s biggest investment firms, who guard the their practices
      zealously. Goldman Sachs, for example, has accused a former computer
      programmer of stealing the valuable code, launching a high-profile legal

      The AFL-CIO and some allied Democrats would like to cut down on the
      overall level of trading, or at least give the U.S. government a piece
      of the action, which would likely tamp down trading.

      Democrats and labor officials would also like to take a bite out of
      Goldman’s profits. Liberals are angry the company, which immersed itself
      in the frenzy of speculation leading to last year’s financial collapse,
      is now making huge profits after accepting (and repaying) $10 billion in
      government aid. Goldman employees are on track to earn an average of
      more than $700,000 this year.

      There is also a growing realization among Obama administration officials
      and lawmakers that tax increases may be necessary to curb the ballooning
      federal deficit.

      The idea of taxing financial transactions has gained some support on
      Capitol Hill and among senior government officials in London, a major
      foreign financial center.

      In Congress, Rep. Peter DeFazio (D-Ore.), chairman of the Highways and
      Transit Transportation Subcommittee, has seized on the idea as a way to
      help pay for a new massive surface transportation reauthorization bill,
      estimated to cost $450 billion over six years.

      Instead of taxing all stock transactions, as the AFL-CIO has
      contemplated, DeFazio wants to focus on oil-based derivatives.

      At the end of July, shortly before the House broke for the August
      recess, DeFazio introduced legislation that would impose a 0.2 percent
      transaction tax on crude oil futures contracts. The legislation would
      tax the options for oil futures (in other words, the premium paid to
      have the option to buy a futures contract) at 0.5 percent.

      “The tax is simple; it imposes a small burden that penalizes short-term
      traders for speculating on the price of oil,” DeFazio said in a
      statement. “This legislation exempts legitimate hedgers from the
      transaction tax. Since the tax is on speculation only, it deters
      speculation and undermines much of the crude oil price bubble.”

      DeFazio estimates his proposal, which has been referred to the House
      Ways and Means Committee, would raise $190 billion over six years. It
      has 29 cosponsors.

      An aide to a liberal Senate Democrat said a transaction tax seems like a
      good idea but did not know who might champion the cause in the upper
      chamber. An aide on the Senate Finance Committee was not aware of
      discussion of the proposal.

      Taxing financial transactions has gained some momentum in Europe. Lord
      Adair Turner, chairman of the Financial Services Authority, Britain’s
      top banking regulator, voiced support for taxing financial transactions
      in a recent magazine interview. The French government has endorsed the
      idea as a way to fund development in poor countries.

      The proposal to tax financial transactions is also known as a “Tobin
      tax,” after the late American economist and Nobel laureate James Tobin.
      Tobin proposed a transactions tax in the early 1970s to discourage
      currency speculation after the collapse of the Bretton Woods
      fixed-exchange-rate system.

      Keep On Keepin' On

      'If we do not change direction, we are likely to end up where we are
      - Chinese proverb

      'If you don't have a strategy, you're part of someone else's strategy.'
      - Alvin Toffler

      Carl Davidson

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