A New Approach to Funding the Fight Against AIDS, Poor Health, and Climate Change
A financial transaction tax to make globalization work for the most vulnerable!
Today’s reality: In 2000, the world committed to the Millennium Development Goals (MDGs) on health, education, climate, sanitation, women’s rights, and poverty—yet without bold change they will not be met by 2015. The U.S. has made specific promises to fight AIDS, poor health, and the affects of climate change in the developing world—efforts that are essential to world economic and human security—yet is not on track to meet them. The global financial crisis, caused by the big banks, has thrown these promises further into doubt and thrown million in Africa, Asia, and Latin America into poverty. 46 million more people are living in poverty, global job losses could total 51 million, and an estimated 200,000-400,000 more infants will likely die in developing countries as a result of the crisis.
A bold new idea… Big banks must pay their share: There is growing momentum for the simple idea that those who caused the financial crisis should be fairly taxed—and doing so can help the U.S. keep its global promises and address needs at home. Around the world the idea of a modest levy on financial transactions, called a ‘Financial Speculation Tax’ (FST or Financial Transaction Tax FTT), is gaining traction. This tax would raise revenue from the under-taxed financial sector, which accounts for an increasingly large share of our economy, while curbing speculative activity that destabilizes that economy.
The revenue raised by an FST would be invested in domestic as well as global priorities—funding job creation at a time when unemployment in the U.S. is affecting millions.
For global health and climate change, a specific tax on currency transactions should be enacted to fund global health and climate change needs.
What an FST would raise: It is estimated that a tiny levy of 0.05% on all financial transactions in the U.S would raise at least $175 billion annually, and billions more if enacted globally. A sub-set of that, taxing wholesale currency transactions on the U.S. dollar, at an even smaller 0.005% rate, would raise approximately $28 billion per year. Foreign exchange is the largest market in the world—worth $800 trillion a year, and the only part of the financial sector with virtually no taxation.
How an FST would work: FTTs have already been in existence in a range of settings, so they have been well tested: In the UK a 0.5% tax on share transactions raises more than £3 billion each year. In the US a small transaction tax has already been implemented to fund the Securities and Exchange Commission. The currency transaction portion would be especially simple as the wholesale “dealing” banks already settle their transactions through a computerized system, so collecting the tax would involve the introduction of a couple of lines of software code. Those of us engaged in the real economy—investing for college or retirement or changing currency for travel or business ventures—would barely notice this tiny tax.
What is needed: The G20 already has this on their agenda—and P.M. Brown, Chancellor Merkel, Pres. Sarkozy have all voiced support—but the U.S. lags behind. When the G20 finance ministers meet at the end of April, they must be pushed to support this simple idea. Members of Congress should support existing bills aimed at domestic issues and introduce new efforts to ensure those hardest hit around the world by the financial crisis do not see promises from the U.S. disappear as well. Activists who care about the earth, working folks in the US, and the rights and wellbeing of people living in poverty must unite.
See Baker, Pollin, McArthur, and Sherman, “The Potential Revenue from Financial Transactions Taxes,” Center for Economic and University of Massachusetts Policy Research & Political Economy Research Institute, Dec 2009.
See Currency Transaction Tax, Rate and Revenue Estimates, Rodney Schmidt, 2008.