Healing the Economy: FTT to Phase in at Wall Street
Guest post by: Trenton Fortes
The country is wounded. Large financial institutions as well as the Wall Street honchos are raiding the ailing economy repeatedly, leaving behind millions to suffer the aftermath. Medical care has gone beyond the affordability of the common man. College students get drowned in debt much before they graduate out of their schools.
So, to curb this menace and to heal America, pro-consumer advocacy organizations as well as individuals have proposed that “financial transaction tax” or FTT be levied on all speculative activities of Wall Street related to stocks, bonds and derivatives.
What is FTT?
FTT levies a tax of 0.5 percent (one half of a percent) on all forms of Wall Street trades. This tax, as projected, would raise around $350 billion in revenue to help the ailing economy stand back on its feet, boost job growth, replenish funds for essential services, and demoralize erratic, high volume/short-term return automated Wall Street gambling that results in various socio-economic crises.
The $350 billion raised through FTT will be sufficient to bridge the funding gap felt in every state that is subjected to deep budgetary cuts or sequestration, while a surplus of billions will allow the government to invest on different sectors to create more jobs annually.
Here are some highlights of FTT:
- FTT is similar to sales tax people pay for on a lot of goods/services. However, there is nothing as such being levied at the moment on Wall Street transactions.
- FTT doesn’t apply to day-to-day consumer activities and that includes the use of debit cards to make purchases, ATMs, getting a mortgage and investing on 401k pension plans. Ordinary investors will witness minimal impact on their portfolios as a result of the FTT.
- This kind of tax would target leading banks operating in the country and other financial institutions such as investment firms, hedge fund investors, angel investors, etc. For instance, JP Morgan, Citigroup, Morgan Stanley and Goldman Sachs alone represent 25 percent of the overall global market volume share of foreign exchange or currency trades.
- The implementation of this kind of taxation has been highly successful. For example, the London Stock Exchange has already incorporated a 0.5 percent tax on all forms of stock trading happening in the United Kingdom (UK). This has helped the local government there to raise billions in revenue without hampering the smooth functioning of all financial processes and still being considered as the largest bourse in Europe.
- In addition, FTT has got the fibre to discourage the widespread proliferation of speculative tactics currently employed by the Wall Street inhabitants. It can curb to some extent excessive speculation that was found to be one of the major contributing factors of the Great Recession of 2008 – a time when rogue traders were handsomely rewarded with the likes of bonuses and bailouts for taking the economy for a ride.
As per the most recent data, speculative activity has grown by almost 400 percent since the past one decade. On the flipside, a meager 2 percent of all the currency trades are used for building-up the economy in relation to goods and services.
As already evident from the above facts, FTT could be that one panacea the government has been looking for to recover from its serious financial crisis. Certainly, it has the potential to fund 9 million jobs with an average pay of about $38,844 per Annam or save 1.7 million struggling homeowners from the brinks of an impending foreclosure.
Even U.S Senator Elizabeth Warren of Massachusetts has recently said in her official Facebook page that the country is looking into the eye of another real and growing socio-economic crisis – retirement crisis. Over there she said that this crisis might bring down once financially-strong and active middle class to the ground and so, cutting back on the Social Security funds in 2013 would inevitably prove to be the last nail in that coffin.
This is because millions of cash-starved middle class households depend on their Social Security benefits to make their ends meet. It has become their lifeline that enables them to meet their financial obligations as well as cover up their basic living expenses. This would particularly jeopardize the retirement plans of the seniors who have nowhere to go for any kind of financial or “debt help”.
However, the real challenges to deal with if some sort of FTT comes in to effect is that how the government should spend all the new funds. According to Rep. Ellision, those funds could be used to improve domestic care like infrastructure, education/college debt relief, household debt help, health care and retirement accounts.