09 November 2019

Why I support a securities transaction tax, and other tax increases primarily aimed at wealthier Americans

There's a great deal of discussion among Democrats these days about taxes. It is clear that Republicans are LIARS when it comes to taxes, as they basically just want to transfer wealth to the top and don't care a whit about long term debt, OR about investing in our nation's future. As the Trump Tax Giveaway to the Superrich proves.

One of the proposed progressive taxes Centrist Democrats object to is the idea of a securities transaction tax. Such Democrats have, over the past 30 years or so, largely bought into Republican economic theories, but it's time to return to an earlier view that realistic taxation is, as Justice Brandeis put it, "the price of civilization." First point. Proposed transaction taxes are TINY, and would probably be structured to not apply to IRAs and 401(k)s. But apart from that, the average investor would pay at most a few hundred dollars per year. MOST developed countries have these kinds of taxes, and in many cases higher than what is proposed here.

But, secondly, this is an example of a tax that's actually designed to disincentivize economically destructive behavior, namely large scale short term trading, which is basically gaming markets to take the equivalent of rents from the top, as opposed to the rational and original purpose of securities markets, which is to raise capital. Investors who are primarily interested in investing in successful businesses to build capital value and participate in a production economy tend to buy and hold stocks, rather than trade them short term, and this is better for the economy. Such investors would be little affected by a small transaction tax, and if it were deemed to be an issue, it would be a simple matter to exclude the first $1000 or even $5000 of tax, which would then mean that the tax would apply ONLY to people and institutions who are engaging in relatively massive short term trading. It is perfectly legitimate and actually a positive good to discourage this behavior, as it does not contribute to growth in the economy but only serves to transfer of wealth from production upward to the very richest.

Even with these considerations, which are an example of the use of tax policy to regulate the economy as opposed to raising revenue, it is estimated that the tax would in fact raise a fair amount of much needed revenue. Which brings me to a third point. WE NEED TAXES which fall more on wealthier people in this country. Wealthy people, even moderately wealthy people, NEED TO PAY MORE IN TAXES. This includes me, although I don't qualify as wealthy, just reasonably comfortable.

We have before us a truly desperate situation, where we must rebuild nearly our entire energy and transportation infrastructure in a fairly short period of time (because of deferred maintenance in part, but mainly to address the Climate Emergency). We must also revamp our medical care system to ensure that everyone is covered, because it is our national shame that alone among the wealthy nations of the world we have failed to do this, and there simply is no valid reason why we should not. Further, we must make up for a longstanding funding deficit for education and basic research. To name just a few key things. The enterprise of American civilization has been choked by greed and hoarding at the top, and it is time to come together as a people and make the decision to use more of our resources and economic strength as a nation to ensure not only our survival but our character as a country of social mobility and a robust middle class into the future. Much of this will come from policy reform, but some of it must come from MORE INVESTMENT. The ONLY way to do that is to increase spending on these critical factors. Given the Climate Emergency, it is no exaggeration to say that we need to mobilize in a way equivalent to the mobilization of World War 2, and sooner, rather than later. This cannot be done for nothing... everyone must contribute. But from those who have been rewarded with outsize, even excessive wealth, more must be asked. And from those who have modestly more, modestly more must be asked. It is time for us to ACCEPT THIS REALITY, and even embrace it, for it is the only path forward that makes any sense long term.



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