Solutions are not hard; even when it comes to our long-term debt. Politics just makes them hard to implement. But there are simple and equitable solutions to the question, ” Hey, who’s gonna pay for that?”
Don’t worry, it’s in plain English.
It’s not a nuanced set of feel-good answers. It’s a sledgehammer. It comes as close as any I’ve seen to making everyone pay. It will do more than any super-committee, sequestration, or any other partisan plan will do to simply enhance the pay-down our long-term debt. And it will work; and work without choking the recovery the way austerity is choking the life out of recoveries in the UK and the Eurozone.
It’s a two-tier plan that attempts to assure that Wall Street, as well as everyone else, has at least some skin in the game for paying our bills instead of being the deadbeat dads of the world stage.
Part 1–The .1% Debt-Reduction Tax
It’s simple. One penny for every hundred dollars spent gets collected and remitted to be paid out monthly on the long-term debt as of a given date.
In other words, a simple .1% Financial Transaction Tax on every dollar of financial goods or services would be levied which can only be used for reduction of the long-term debt as of a given date; say, the end of fiscal year 2102.
Ok smarty-pants, someone surely will say, how do you collect a fraction of a penny for the less-than-$100-purchases? Well, ummm, you don’t. If the transaction is less than $100 the tax is zero. Yes, there will be a HUGE upswing in $99.99 specials. But so what? Maybe retailers, doctors, dentists, plumbers, etc. will run a lot of $99.99 specials. Maybe that’ll stimulate some demand. Demand creates jobs. People with jobs pay taxes and get off of unemployment. Jobs are good. All of which reduces the long-term debt. Classic Win-win.
Again, this tax would not be allowed to be spent on new appropriations, so calm down Republicans. Republicans can not shout that it’s more tax and spend policy because it’s actually a tax and pay-down debt policy, or tax and pay your bills policy. Absent an 80% vote by both the House and Senate and the President’s approval, the revenue from this tax would be forbidden to be used for anything else (not like the Social Security Trust Fund that George W. Bush used to fight two bogus wars).
Once implemented I don’t see a need for the anachronistic debt-ceiling cluster-ummm-mess.
It would make sure that everyone, criminals, pimps, gamblers, tax evaders, poor and rich alike, will pay something. Dentists, lawyers, CPAs engineers, architects all charge for services. Poor who buy groceries would be taxed the same as soccer moms. Tourists, undocumented immigrants, anyone who spends cash or credit would be contributing to the mess that decades of uneven tax policies, special interests, spineless politicians and people who want something for nothing have created.
Ah, but,but,but won’t people still cheat?
Sure. You betcha they will. But we don’t take down all the STOP signs because some idiots still run through them either. If they cheat and get caught make it worth something. Make it hurt. Make the fine worse than the tax. And remember, this tax is not to replace anything else that lawmakers address. This is extra. It’s gravy just for paying the excessive sins that any and all lawmakers have already approved in our lifetimes…but not any new ones. Lawmakers are on their there.
Some people will shout that it’s an unfair tax on the poor. But is it really? Really? Under $100 in groceries, clothes, etc., is zero tax. $100+ is one penny. $200+ is two pennies. I think that’s reasonable. But a new corporate jet? That’s real money. If we are ever going to make any headway in Washington, we have to take something out of the reach of political whims. Something that spans political cycles and can’t be tampered with or hijacked by one party who happens to be in office. And something that reassures world-wide investors that we are addressing the problem. This is that something.
Will it pay off the debt? No, but it will help. And it does more good than killing Big Bird.
When we went to war in WWII everyone sacrificed. The same cannot be said about when we went to war in Iraq and Afghanistan, the only two unfunded wars in U.S. history, including the Revolutionary War. It’s time to pay for those wars. Yes, the wars were paid for, but primarily from Bush using dollars from the Social Security Trust Fund. Over 60% of our total debt is to ourselves, not China or Japan. That’s bull. China owns 8% of our debt. Japan, maybe 5%.
And if Congress is so worried about someone skating by, the House of Representatives only worked 126 days in 2012. Any complaints from them and they go to a pay-by-the-number-of days-worked pay scheme, and no more life-time pensions and healthcare benefits. Let them live by some rules for a change. They are the true welfare recipients. We pay them full-time pay for working 126 days a year? Shut up and do your jobs deadbeats!
Part 2–The Financial Transaction Tax on Stocks, Bonds and Derivatives
Follow Germany and France’s lead. Even with 17 different fiscal policies, all trying to use one monetary policy, Europeans and the Eurozone are leading the way to hold the big money interests (their versions of Wall Street) accountable and to the same standard as everyone else.
The details of Europe’s new financial transactions tax won’t be made public for a few weeks, but the Financial Times’ Alex Barker has reportedly seen a draft, and reports that it’s forceful. The tax is being implemented by 11 countries, including most importantly Germany and France.
Europe’s tax will be imposed at two echelons : 0.1% on securities trades ( a)the corporate debt of any corporate equity, common or preferred and their wholly owned subsidiaries and b) debt securities listed structured products, convertible bonds, municipals, agencies, sovereign debt, and treasuries).
In addition, a levy of 0.01% on derivatives trades will be imposed. Adding to the inclusionary aspect, any trader whose institutional headquarters is in one of the 11 countries will have to pay the tax. So will all transactions taking place in those countries, and all transactions involving securities issued in those countries are fair game.
The European tax will serve two primary functions:
- To raise substantial tax revenues to be added to other ongoing measures to reduce long-term debt load.
- To discourage reckless financial speculation.
I’m not so sure how successful this tax will for that second function.
As for the U.S., naturally, Wall Street will not like this idea. After all, who else can steal billions of dollars from 401k plans of ordinary Americans and be fined a few million? That’s like fining me a buck for stealing a thousand dollars from widows and orphans! If you or I stole a pack of gum we’d be hauled off in handcuffs and do hard time. Wall Street banksters got bonuses!
Even the UK, though they roundly deny that they would ever do such a thing, already levies a surprisingly large financial transaction tax of 0.5% tax whenever anybody — anywhere in the world — trades a UK stock. And yet, somehow, London remains the first choice for international companies looking for a place to list their shares, including their out-of-control “liberated sibling”, the U.S.
Wall Street will clamor that the tax would dissuade traders from using U.S. exchanges and diminishes their ability to compete. They also bank on the hopes that no one in this country is aware of how well they are working already elsewhere.
The proposed Eurozone tax, which is much smaller than the UKs, has had very little effect on how and where financial markets perform. The “if you tax me, I’ll just move elsewhere” threat is empty in practice, especially if you have a wisely written law which makes tax avoidance difficult. More so when you’re talking about established financial institutions rather than individuals. And where will they go? This transaction tax will be in the U.S., the UK, and the Eurozone. All of the biggest exchanges.
- Doing so would be politically suicidal and
- As a practicality, it would be incredibly complex to circumvent if the laws were written with a even modicum of competence.
Pony up Wall Street, the free ride is over.
The high-frequency trading that has overtaken the U.S. stock market has become so speculative and so dangerous to the overall well-being of the economy that other markets around the world have shunned them. And these taxes are low enough that any remotely sensible financial transaction will remain sensible on a post-tax basis. Of course it’s possible that total trading volume might decline a small amount in some derivtives markets but in the end, it could very well get investors to start looking at the viability of businesses rather than who can trade the fastest (see Facebook).
The Important Part: Everyone Pays and It’s Finite
Nay-sayers will abound, but if you are a deficit-hawk, this two-step assessment is all-inclusive and can only be used to pay-down long-term debt as of a given date. It features a dedicated revenue stream that can never be spent on any new appropriations-what’s not to like? The government revenue from these two assessments could never be put into the General Fund without an 80% majority in both Houses of Congress and whoever may be the current President’s signature.
It’s not in place of any other debt-reduction measures, it’s in addition to any other debt-reduction measures. Hopefully measures that will NOT follow the insane approach of austerity, that literally chokes demand, gets people laid off, and drives up government spending while reducing payroll and income tax collections.
And the advantages far outweigh the disadvantages:
- Everybody pays
- No spending on anything after a specific date except the debt as of that date
- Easily implemented
Once the agreed-upon amount is paid, the assessments can expire. No current or future programs can be added to the amount being paid down by the new and dedicated revenue stream. The assessment is easily implemented because it’s collected and remitted the same way sales tax is now collected and remitted to states that levy sales tax.
If you are a concerned citizen or (group of citizens) who fear for the poor, the elderly or the disabled, then this allows the long-term debt problem to be segregated from finding solutions to whatever else needs addressing without being co-mingled with the issue of the long-term debt.
And if you’re like me, I’m tired of criminals and cash-only businesses getting away with tax avoidance.
Of course, politicians and pundits would take this plan and twist it, call it names, and turn it into black helicopters and tin foil hats.
But if both sides hate it, it must be good.
Buck up America and pay your debts. And get rid of tha ridiculous debt-ceiling.
Harvey A. Gold