Abstract

We know where the money is. How do we get it? There are, of course, several ways of tapping this pool of dollars for broader social purposes, including raising income taxes on high incomes, reinstating and strengthening the estate tax, or levying a special surcharge on financial sector profits. However, the approach I favor focuses on taxing the primary activity that drives much of the individual incomes and corporate profit levels in finance. A financial transaction tax (FTT)—a tax on the trading of financial assets—has multiple appeals. First, it could generate significant revenue. Second, and equally important, it is a progressive tax that would affect primarily wealthy individuals and large corporate institutions, with benefits potentially flowing to many. Further, while an FTT is not a substitute for effective regulation of finance, it would act to dampen some financial activity, helping to reshape a political economy in which finance has become overly dominant. Finally, the political logic of an FTT—the dynamic of Wall Street vs. Main Street—should give it wide appeal.

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