A decade after bonus-chasing executives like Angelo Mozilo crashed the economy, we need tax incentives to push companies to narrow the gaps between CEO and worker pay.
The Democratic Party Platform Committee has taken a position in support of a tax on Wall Street transactions, according to a statement by committee member Rep. Keith Ellison. This is just the latest sign of the mainstreaming of a bold policy that would shrink the size and power of Wall Street.
Even at a rate of just a small fraction of a percent on each trade, such taxes would slash the profitability of the high-speed speculation that dominates our financial markets but has no real economic value. At the same time, the tax could generate massive revenue for job creation and other urgent needs.
If you want to get a sense of just how far this transformative idea has come, you need look no further than a 2009 cable sent by the U.S. embassy in London back to Obama administration officials in Washington.
Unearthed by Wikileaks, the cable is a litany of complaints about then-UK Prime Minister Gordon Brown’s efforts to get the Obama administration to join the financial transaction tax bandwagon. The cable notes that Brown even had the gall to raise the issue in a Thanksgiving Day call to the U.S. ambassador.
Obama, we learned later, was not Brown’s problem. According to Ron Suskind’s 2011 Confidence Men, a book based on 700 hours of interviews with high-level Obama staff, the president initially supported the financial transaction tax. Larry Summers, who was then serving as Obama’s Director of the National Economic Council, put the kibosh on it.
Along with Treasury Secretary Timothy Geithner, Summers made sure that Obama would take sides with the Canadian conservatives to block a proposal by Brown and the leaders of Germany and France for a G-20 agreement on the tax at their 2009 summit in Pittsburgh.
Brown, of course, was later unseated by British conservatives who made Summers and Geithner’s objections seem lukewarm. Former UK Prime Minister John Major even used rhetoric harkening back to World War II, comparing the German and French plan for the tax to a “heat-seeking missile” directed at London’s financial center. Boris Johnson, the former London mayor who now may be headed towards the Prime Minister’s seat, is also hostile.
So what accounts for the change in the Democratic Party? The Platform Committee’s position didn’t come out of nowhere. Over the years, growing U.S. and international campaigns for the tax have pushed on multiple fronts to mainstream the issue.
One prong has been to help generate new research on the potential benefits. In 2010, after consultations with international civil society experts, the International Monetary Fund prepared a report for the G20 leaders confirming that transaction taxes were administratively feasible and could raise significant revenue.
In 2011, the Joint Committee on Taxation, the body in Congress responsible for generating officials revenue estimates, analyzed one of several FTT bills, concluding that a U.S. tax of 0.03 percent on stock, bond, and derivative trades could raise $350 billion over 10 years. More recently, the Tax Policy Center estimated that a rate of 0.1 percent could generate up to $541.5 billion for the U.S. government over 10 years. Models with higher rates could raise even more.
The campaigns have also pushed for new and sometimes unusual allies, including a growing list of business and financial industry professionals. In 2011, for example, Bill Gates told the Guardian, “It is very plausible that certain kinds of FTTs could work…I am lending some credibility to that. This money could be well spent and make a difference.”
A diverse array of labor, environmental, health, and other activists also rounded up support for the tax from prominent faith leaders, including Pope Benedict, the Archbishop of Canterbury, and Bishop Desmond Tutu.
In 2014, we started to see shifts among high-level Democrats. Rep. Chris Van Hollen included a financial transaction tax as part of a broader tax reform plan, reportedly with support from Rep. Nancy Pelosi.
Then Bernie Sanders brought the issue into the center of the primary debates. The tax became a pillar of his Wall Street reform plan and he rarely missed a chance to raise it in his stump speeches. By linking the tax to the need for additional revenue to fund free higher education at public universities, Sanders made the tax even more popular.
Where will it go from here? The platform committee will assemble one final time in Orlando to put the final touches on the platform before it comes up for a vote at the party’s national convention in Philadelphia in late July. A recently formed Take On Wall Street campaign made up of dozens of labor, consumer, and other groups aims to keep up the heat and ensure the position in support of the tax is not stripped from the final document.
Of course platforms have a history of being largely forgotten after the conventions are over. But advocates will always be able to point to this as one more measure of progress in a long bumpy road for the financial transaction tax.
Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies and is a co-editor of Inequality.org. Follow her on Twitter @Anderson_IPS