Small and medium-sized investors would hardly notice such a tax, but major trading firms, such as Goldman, which reported $3.44 billion in profits during the second quarter of 2009, may see this as a significant threat to their profits.
“It would have two benefits, raise a lot of revenue and discourage speculative financial activity,” said Thea Lee, policy director at the AFL-CIO.
“The big disadvantage of most taxes is that they discourage some really productive activity,” she said. “This would discourage numerous financial transactions. People flip their assets several times in an hour or a day. They make money but does it really add to the productive base of the United States?”
Lee said that taxing every stock transaction a tenth of a percent could raise between $50 billion and $100 billion per year, which could be used to pay for infrastructure projects and other spending priorities. She said the tax could be applied nationwide or internationally.
The proposal would hit especially hard those hedge funds and large banks earning hefty profits despite the shaky economy from a practice known as high-frequency trading. High-frequency traders use powerful computers to conduct hundreds of thousands of orders in mere seconds, taking advantage of slower traders.
The union claims that the tax would raise between $50 and $100 billion annually and could fund all manner of infrastructure.
This kind of tax will hit New York City and New York State particularly hard, seeing how the state is already reeling from a massive loss of revenue from the declines in the stock market, the collapse of real estate, and the financial crisis shakeout. Another hit in the financial services sector would mean that the state and city would have to find another source of revenues to fill the coffers that are bleeding red ink. That means more taxpayers would be hit with tax hikes.
But that's the unions for you.
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