Take from the rich to help the poor?
A wise man once said, “When presented with two options, pick the third.” It seems that, like our neighbours to the south, we have fallen into a two-option way of thinking: left vs. right, red vs. blue, Liberals vs. Conservatives, us vs. them. Instead of dogma, we need a pragmatic and practical approach to deal with the problems that face us today.
A proposed idea, dubbed “The Robin Hood Tax,” stays quite true to its name. It is a Financial Transaction Tax (FTT) that would levy transactions involving stocks, bonds, foreign exchange, and derivatives – including trade of futures and options related to stocks, interest rate securities, currencies, and commodities. It is important to note that this would be limited to transactions between financial market actors. As such, ordinary consumer transactions like day-to-day banking would not be affected. In fact, even if you were an average stockowner who suddenly struck it rich with a $1,000,000 portfolio, you should not worry very much anyways. This is because the proposed tax is only 0.05 per cent, which would mean you’d cough up $500 when selling your $1,000,000 worth of stock – not exactly robbery. Some analyses have speculated that it could even be viable at half that. If a Robin Hood Tax was to be imposed globally, it would raise much-needed funds for disaster relief, climate change action, renewable energy infrastructure, poverty relief, and anything else that is in desperate need of funds and action that don’t come with the attractions of a yearly dividend. It is taking from the rich and giving to the poor in a very direct way, as the only ones who stand to lose anything are the ones who trade amounts large enough for 0.05 per cent to ever be considered a problem.
The exponential growth of the financial sector, with a focus on short-term speculative gain, has created a ‘casino economy’. We have seen this with the bursting of the most recent bubble in the U.S. in 2008, which had devastating effects in Canada and worldwide. While here it was the average person who felt these effects, it is not the average person who would be affected by this tax, but rather the multi-trillion dollar global financial industry that created the problem in the first place. In the U.S., the criminal banks on Wall St. concocted and sold junk financial products, and instead of being prosecuted, they were bailed out with nearly a trillion dollars of taxpayer money. An estimate for potential revenue from the U.S. alone could raise hundreds of billions of dollars, and the U.S. is indeed one the most important players in this domain.
But then, of course, comes the rebuttal from those who stand to lose from the deal: the financial industry and the government representatives who support them. They argue that this tiny tax would destroy the economy and scare away investment, which means the average Joe would not get his trickle-down, and life would be made worse overall. This is pure self-preservation by the banks themselves, and the informed global citizen demands that they pay their share for repairing the economy, because if the single mother working two jobs can survive, somehow the banks will too.
Canadian Minister of Finance Jim Flaherty has made it clear that he does not support the Robin Hood Tax, mostly for the reasons above (without the history and criticism of reckless investing, of course). However, some countries in Europe have already adopted the system, citing satisfying results. Other countries, such as the U.K. (where the movement originated), have stated that they would be on board only if it were imposed globally. While they are indeed correct that a global system would be most beneficial, countries need to take leadership in establishing the framework for such a tax. The global financial industry is extremely powerful, and until the source of the problem is dealt with, a real plan cannot be created. Switzerland and a few other small countries have commenced similar plans with success, and 11 Eurozone countries are set to propose new plans for FTTs. As Canadians, we must take global leadership and work with other countries in pushing this plan forward. The problems of this world are our own, and they are far more important than price tags.
Is this small tax going to fix the world? Probably not. But with global inequality at a record high, it is without a doubt a solid and simple policy plan that makes sense.