Category: Economics

Brilliant, Simple Fiscal Solution: Tax Financial Transactions

This one seems to me to be a no-brainer. There are two bills in Congress that would impose minuscule taxes on financial transactions of certain types that, depending on the size of the tax, could solve the nation’s financial crisis almost overnight.

SB410 and HR880 are quite similar legislative proposals that would impose a tax of three cents per $100 on the affected transactions. That would, by one estimate, raise $353 billion over 10 years.

But as blogger Andrew Reinbach points out, the system could stand a much higher rate than what is called three basis points. He points out, “A similarly small tax—say, twenty-five cents per $100—could solve the country’s fiscal problems altogether, with room to spare. And it wouldn’t really cut into financial trading, because business people do what they do because there’s a profit to be made. Taxes are just the cost of doing business.”

Here’s the math. A 0.25% sales tax on $1.669 quadrillion would produce $4.172 trillion a year. By comparison, the entire Federal Government spent about $3.8 trillion last year on everything, including debt service.

As our economy has shifted from agriculture to manufacturing to information and now to financial instrument manipulation and management, it makes sense that the tax base should shift along with it. Think what kind of nation we’d have if the 0.25% transaction tax made it possible to reduce or eliminate personal and corporate income taxes. Talk about jump starting the economy!

Who, other than short-sighted Wall Street tycoons, could oppose this idea? Yet, without even spending a moment on research, I’m willing to bet that the financial services industry is already mobilizing against this pittance that would cut into their gargantuan and entirely unjustified profits. (Unjustified, I say, because they don’t add any value to the economy. They just move stuff around.)

 

Change the Label, Change the Game

Over the past 20 or so years, the GOP has become quite adept at OrwellSpeak: labeling things to make them sound good to anyone who doesn’t look behind the name. The Democrats seem unwilling to engage in that practice.

But here’s a no-brainer.

Let’s stop talking about wages and salaries and incomes so that the GOP can rally their base around freedom and opportunity, which are largely disconnected from the underlying ideas of fairness. Instead, let’s change discussions about worker compensation to use the term “purchasing power.”

What small business owner would oppose a bill that would increase the average person’s purchasing power? Or increase the purchasing power of the masses generally? Aren’t they in the business of selling stuff? Don’t they need purchasers?

Replace “Living Wage” with “Adequate Purchasing Power” and see how fast the Right signs up for it.

No?

Oh, well. It was a thought.

 

The Cost of Poverty and the Minimum Wage

workingpoorIn the raging national debate over President Obama’s plan to raise the national minimum wage to $9 over the next several years, one factor seems to have been consistently overlooked. Being poor takes huge gobs of time and creates huge amounts of stress. Employers whose workers are at or below poverty lines pay a significant amount of money in lost productivity and time as a result. Give these workers a decent living wage (and minimum wage, even if and when it reaches $9/hr. won’t come close to that), and watch productivity and profits go up.

I know first-hand how much time it takes for people who are dependent, in whole or in part, on the government for part of their bare subsistence to comply with regulations, file reports, appear for inconveniently scheduled appointments, and deal with health crises. I’ve had to do that twice in my life. Two members of my family are currently below poverty line thanks to unemployment.

If your daughter needs to see a doctor and the doctor is assigned by the government, you take her when she can get an appointment, whether or not it’s convenient for you or your employer. When your case worker decides that the rules mandate an in-person meeting to review your situation, he or she doesn’t generally have the luxury of worrying about whether you’re scheduled to work at your (probably part-time) job at the time of the appointment.

And if you don’t have enough money to pay your bills, you have to spend inordinate amounts of time on the telephone with creditors explaining that, while you’d really love to be able to make this month’s phone or utility bill payment, your son broke his arm and the ER costs (you don’t have a doctor, let alone one on call) ate up your entire paycheck. For three weeks.

In agreeing to pay people well enough to keep them out of poverty, employers would reap significant savings that are probably invisible at the moment.

Add that to the dozens of other sound economic reasons for increasing the minimum wage and I have a difficult time understanding what real concern motivates its opponents.