Recently, various Democratic politicians have been pushing a range of tax options. From what I can determine, and from what many experts are saying, most of them would cause more harm than good. I’m not saying that we don’t need more federal revenue. I’m saying that everyone is looking in the wrong places.
Let’s go back to basics. First, you can’t tax people who have no income. Second, despite the political rhetoric, it’s highly unlikely that a “wealth tax” is constitutional. Third, a wealth tax would destroy a lot of entrepreneurs while only marginally inconveniencing financial types. That’s because the wealth of the entrepreneurs is usually tied up in stock and having to sell large blocks of it to pay taxes could destroy the company or at least damage it. The same thing could happen to family held companies without large cash reserves. Fourth, extremely high marginal tax rates would cause either creative tax evasion or tax flight, both of which would leave the upper middle class shouldering the burden, not the wealthy.
BUT… there is another source of untapped revenue that has several advantages. First, it targets the financial community, and that’s where most of the money is. Second, it’s about time that Wall Street starting paying the bill. And third, it’s not really that onerous a tax when you think about it. And fourth, some states already use it.
I’m talking about a transfer tax on every share of stock sold on every stock exchange in the U.S. The tax would be levied on the seller, since the seller gets the money. With computers, keeping track shouldn’t be that hard.
I did some back of the envelope calculations, which astounded me. The other day, which wasn’t extraordinary, the top 100 stocks on the NASDAQ-100 had a daily volume of over 400 million shares traded. Only one of those stocks sold for less than $6 a share and the rest looked to average a hundred dollars a share. The yearly sales value of just those 100 stocks look to exceed $10 trillion annually. A one percent transfer tax on the sales of the shares of just those one hundred companies would yield about $100 billion annually… and there are over 4000 publicly traded companies on U.S.
Now I know that there are also some public start-up companies whose shares are valued in cents, and some sort of sliding scale would be necessary for them, but given how much Wall Street has benefitted, is a one percent a share, or even half of that, too much to ask of the large established firms… and the algorithm-driven trading computers used by market profiteers?