Tobin tax makes sense (and dollars)

Lana
Lana Payne
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It's no longer just a hobbyhorse for left-leaning economists, academics and progressives.

The idea of a Tobin tax - a tiny transaction on global currency speculation - has made its way into the mainstream and appears to be gaining steam.

And there's nothing more mainstream than a meeting of the finance ministers from seven of the world's wealthiest countries. They met earlier this month in Iqaluit.

It's no longer just a hobbyhorse for left-leaning economists, academics and progressives.

The idea of a Tobin tax - a tiny transaction on global currency speculation - has made its way into the mainstream and appears to be gaining steam.

And there's nothing more mainstream than a meeting of the finance ministers from seven of the world's wealthiest countries. They met earlier this month in Iqaluit.

Several of the finance ministers, including some from unlikely quarters given their free-market leanings, pushed for the creation of a Tobin tax or an international financial transaction tax.

As journalist Doug Saunders explained in a recent article in The Globe and Mail, France, Germany and Britain have taken up the campaign for the tiny tax on financial transactions by "selling the merits of a scheme to rein in the forces of global capital and channel vast sums from the banks into the hands of the people."

This idea was also raised at a gathering of the G-20 countries last fall in Pittsburgh. British Prime Minister Gordon Brown, who previously had not been much of a supporter of the proposal, now sees the tax as a way to help governments struggling with huge deficits as a result of a deep economic recession.

It is not a new proposal. The idea was first put forward by American economist James Tobin in the 1970s as a way to make the rich, in this case, global capital and the financial sector, pay a fairer share. That share would then, in turn, be used to help those with little, such as the Third World. But now western industrialized nations need help, especially after spending hundreds of billions bailing out banks.

Tobin, a Nobel laureate, advocated a one per cent tax on all international financial transactions.

To be clear, the proposal on the table from Brown and others would only be a fraction of a percentage point and would be collected on the millions of transactions made daily.

Estimates are nearly $1,000 trillion in foreign exchange trades are made annually. A tiny tax, even a fraction of a percentage point, would raise billions and would and could be used, like all taxes, for the public good, including helping out the developing world.

In addition to raising money, the tax would discourage short-term traders without having much impact on long-term international investment or genuine investors, according to economists who support the plan.

Given the economic damage the financial sector has caused, such a proposal is already gaining popular support, but there is still resistance including the United States and not surprisingly, Canada.

Shows of support

Big name economists are speaking out in favour of its implementation, including award-winning economists Joseph Stiglitz and Paul Krugman and others.

Stiglitz says today's technology means implementing the tax is no longer a problem. It is merely a matter of collective political will.

"The financial sector polluted the global economy with toxic assets, and now they ought to clean it out," he said in an interview recently.

If U.S. President Barack Obama is keen on making the financial sector pay for the grief it has caused and reining in its arrogance, sense of entitlement and greed, a Tobin tax might just be the answer. And it has a supporter in Obama's chief economic adviser, Paul Volckler.

It would indeed send a strong message to the financial sector - a sector that has received hundreds of billions of dollars in taxpayer bailouts around the world and caused a worldwide financial meltdown and subsequent global recession - that business as usual is over.

Despite causing worldwide economic hardship, there doesn't seem to be that much change on behalf of many in the sector. Take Goldman Sachs as an example. The financial giant received a taxpayer-funded bailout and is already raking in billions in profits and paying out executive bonuses.

Unfortunately, while governments around the world are willing to push aside conventional wisdom, Canada is dragging it heels.

It would be a real shame if our government was the holdout on a plan that would not only raise much needed funds for governments all over the world, but would mete out a dose of economic poetic justice to those who caused the mess in the first place.

There was a reason Robin Hood was such a popular figure in literature. His version of wealth distribution appealed to the masses and to those of us who understand that greed needs to be tempered.

Perhaps Stephen Harper's declining poll numbers will make the Tobin tax a lot more attractive. But that would involve a lot of gagging as he tries to swallow the idea of this tax on capital.

Given his opinion that no tax is a good tax, Canadians may have to start a Facebook Tobin tax campaign to get their point across. Hey, it worked with proroguing.

Lana Payne is president of the Newfoundland and Labrador Federation of Labour. She can be reached by e-mail at lanapayne@nl.rogers.com. Her column returns Feb. 27.

Organizations: Globe and Mail, Third World, Goldman Sachs Newfoundland and Labrador Federation of Labour

Geographic location: Iqaluit, France, Germany Britain Pittsburgh United States Canada

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  • Ed
    July 02, 2010 - 13:31

    I agree with taxing international financial transactions.. and while we are at it since unions are not charitable organizations we should remove the tax exemptions for union dues. Also, while we are looking at exemptions we should take away the loophole that allows politicians to give themselves a tax free allowance as part of their income. I have many more but that will do for today...

  • Sue
    July 02, 2010 - 13:30

    Do you want higher taxes, o you can pay for Ignatieff's foriegn abortions.Spread it around.

  • David
    July 02, 2010 - 13:21

    Ah yes, the left's answer to everything. tax it. All taxes on business are passed on to consumers at some point as they are considered another business expense. As to a Facebook page, where is the one condemning McGuinty in Ontario for proroguing the legislature. Oh wait, he is a Liberal so it's OK. Silly me what was I thinking.

  • Ed
    July 01, 2010 - 20:20

    I agree with taxing international financial transactions.. and while we are at it since unions are not charitable organizations we should remove the tax exemptions for union dues. Also, while we are looking at exemptions we should take away the loophole that allows politicians to give themselves a tax free allowance as part of their income. I have many more but that will do for today...

  • Sue
    July 01, 2010 - 20:18

    Do you want higher taxes, o you can pay for Ignatieff's foriegn abortions.Spread it around.

  • David
    July 01, 2010 - 20:04

    Ah yes, the left's answer to everything. tax it. All taxes on business are passed on to consumers at some point as they are considered another business expense. As to a Facebook page, where is the one condemning McGuinty in Ontario for proroguing the legislature. Oh wait, he is a Liberal so it's OK. Silly me what was I thinking.