Protesters urged to demand "Robin Hood" tax
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Kai Ryssdal: One of the early observations about the Occupy Wall Street protests was that while they were against a bunch of things, they weren’t necessarily for anything. It’s still a little bit amorphous.
But there’s starting to be a push for something called Robin Hood tax: a 1 percent tax on financial transactions and currency trades. It’s not a new idea. It’s about 40 years old, comes in and out of style with some regularity. You might have heard of it as the Tobin tax, named for the Nobel Prize-winning economist who thought it up.
Earlier this year, a thousand economists signed a letter saying it would help fix our financial problems. European officials have proposed it in the European Union.
But how might a Robin Hood tax work, beyond the whole take-from-the-rich thing? Our New York bureau chief Heidi Moore reports.
Crowd: How do we end this deficit? End the war, tax the rich.
Heidi Moore: It’s been three years since the bailouts. Banks are doing OK. So a lot of taxpayers are asking: Where’s our share?
Clinton Stretch: There are people who are frustrated with Wall Street and therefore the markets, and are looking for a way to ask those sectors in the economy to contribute more.
That’s Clinton Stretch, a tax policy expert at Deloitte. The hot idea to even the score this year has been what’s called the Robin Hood tax. It tends to come up whenever social justice and capitalism clash. The Occupy Wall Street protesters are being urged to demand a 1 percent tax on all financial transactions, from selling stocks to buying currencies.
Matt Slaughter, a dean of Dartmouth’s Tuck School of Business, told me that the tax:
Matt Slaughter: Sounds intuitive and maybe sounds just in some sense. But boy, like a lot of things in public finance, the devil’s in the details.
Slaughter says a 1 percent tax would deeply dent bank profits. Europe is proposing just a tenth of 1 percent on all stock and bond sales, and less for other transactions. Analysts say just that could raise up to 50 billion euros a year — or half the profit of Europe’s 90 biggest banks.
Banks will likely pass costs onto consumers. Buy you would also pay the tax directly — any time you buy or sell a stock. And, Stretch says, the tax would affect our 401(k)s if fund managers hold off on trades to avoid fees.
Stretch: It’s not clear to me that you really want to give your mutual fund manager an incentive to not do the very best thing for your account the moment that they perceive it’s a good thing to do.
The Robin Hood tax has its own website as well as a Facebook page and Twitter account. But despite its populist appeal, few economists think it will happen in the U.S. any time soon.
In New York, I’m Heidi Moore for Marketplace.