Taxable Income

(Picture courtesy of Thomas Hawk at flickr.com.)

When the leaders of France and Britain got together yesterday, they were facing realities that are not kind to the European community’s economic future.   That they suggested what is bound to stir a lot of bad feelings among the banksters, a tax on financial transactions, shows vision that we desperately need.   The U.S. would be in much better shape for the future if there were even the slimmest prospect that such a concept could be floated here.

Faced with slowing economies, the European community is moving to stop from sliding back into recession.

A transaction or Tobin tax — named after economist James Tobin who first proposed one in the 1970s — has been a near 40-year pipe dream for some policymakers. Calls for such a levy have become more frequent since the financial crisis began unfolding four years, forcing taxpayers to bail out banks.

But the G20 failed to agree amid opposition from the United States, and several countries like Britain have opted to slap levies on bank balance sheets instead.

When Warren Buffett came out with the suggestion that capital gains tax should be raised – so that the very rich like him would pay a more fair share of the funds that our government needs to function – it was in that vein of actual, needed, reforms.  In fact, Italy has already put together a reform plan that raises capital gains taxes to 20% – offsetting some of the stringency of its austerity program for working people.

Said European Commission President José Manuel Barroso and EU Economic and Monetary Affairs Commissioner Olli Rehn;

A financial transaction tax will be a key instrument to ensure that the financial sector makes a fairer contribution to public accounts. The Commission intends to make a proposal in this sense soon, as previously announced.

Part of the attraction of the financial transaction tax (FTT) is its qualities that ‘discourage the type of short-term financial speculation that has little social value but poses high risks to the economy’.    The financial community has more than evidenced its irresponsibility toward the total financial picture in promoting its own interests.

The working people are the ones whose earnings are taxed the most, because through several decades of government of the rich, by the rich and for the rich, working people have had the plus part of the national debt shoveled off onto them.   Since he began to speak aloud about it, Warren Buffett’s secretary’s taxes have become well known.   While he pays 15% on his earnings, she pays around 30%, payroll taxes (the top 1% paid 31.2%).

The concept that having already earned their capitol means that now by ‘recycling’ money already taxes, i.e., investing, is simply putting earned income to work.   This concept is wrong.   Much of capitol is investor income, not earned by those now putting it into play.   This means that investors are rewarded with small tax bills as if they’d sweated hard to put together that capitol.

Stockholders are putting investment money into speculative ventures, just as if they’re put it down at a gambling casino.    The earnings they get from wins are no more productive for the real economy than coins in a one-armed bandit.

The FTT is a sound plan, and one this country would do well to consider, as well.