I recently awoke from a rather pleasant dream in which members of Congress and the President embraced the unique proposition that they had been elected to serve the People of the United States. Congress had determined that healthcare was a matter of right (by simply reducing the age at which a person qualified for Medicare to birth) and that every child should have free access to a college education.
Having thus dedicated the fortunes of the Nation to the future of its children, the members of Congress--conservatives, liberals, and independents alike--collaborated on how to best pay for these commitments and to reform the income tax system. In their wisdom, they decided to transform the taxation system into a tiny financial toll tax on the movement of all money in the economy, effectively transferring the tax burden from workers and small business owners to the wealthy, large corporations, and financial institutions.
Presently, one-quarter of all large U.S. corporations, two-thirds of all small corporations , and most foreign companies doing business in the United States pay no federal income tax--even though they book trillions of dollars in receipts every year and take advantage of America's courts and infrastructure to make their profits. Estimated tax revenues for the 2018 fiscal year are $3.6 trillion, most of which will be paid by ordinary taxpayers. Income taxes are $1.88 trillion; Social Security contributions are $878 billion; Medicare payments equal $268 billion; and $56 billion are withheld for unemployment insurance. Customs and import tariffs will amount to $144 billion, while corporations will only pay $478 billion. Individual income taxes and payroll taxes presently account for four out of every five federal revenue dollars!
Even with all of this revenue, the United States will not balance its budget. Because of deficit spending, government debt now amounts to more than $20 trillion. Of this debt, $1.3 trillion is owed to China, and $5.5 trillion is owed to the government itself, including almost $3 trillion to the Social Security Trust Fund. At the current rate, the Congressional Budget Office projects that the debt will amount to 150 percent of the Gross Domestic Product by 2047.
The Internal Revenue Service reports the voluntary compliance rate of Americans who pay their taxes is 81.7 percent; however, it estimates that more than $458 billion in legitimately owed taxes are criminally evaded each year. The attorney-client "Panama Papers" leaked in 2015 demonstrated how easily wealthy individuals, including politicians, use offshore companies to hide money from tax authorities.
It is difficult for workers, whose income taxes are withheld from their paychecks, and small business owners, who have to file and pay quarterly, to avoid taxes. However, with the federal tax code presently consisting of 74,608 pages, it is easy for the wealthy and large corporations to rely on attorneys, and the loopholes created for their benefit, to avoid paying their fair share of federal taxes. Present "reforms" under consideration by the President and Congress will further shift the burden of taxation to workers and small business owners.
Writing in the Fourth Century BCE, the Greek philosopher Plato said, "When there is an income tax, the just man will pay more and the unjust less on the same amount of income." Nothing has changed, nor will it, unless something different is done.
Following the collapse of the banking industry in 2008, proposals were made to target a special tax on financial transactions--not only to raise tax revenues to help pay for the bailout--but to restrain the insane financial gambling that caused the crash. Taking into account the amount of stocks, bonds, commodities, currencies, and futures that are bought and sold every day, the shuffling of funds between banks, and the massive trading of over-the-counter derivatives, trillions and trillions of dollars are being gambled in an economic casino that has little to do with the efforts of most working people and small business owners. It does, however, have everything to do with their lives, their economic stability, and the future happiness of their children.
Many, if not most, of these financial transactions escape all taxation, as they are not defined as "income." This is true, even though the banks are gambling with sophisticated trading software that allows them to place high-speed bets that cheat ordinary investors and destabilize the markets.
A financial transaction tax was proposed in 1972 by James Tobin, a Yale professor who won the Nobel Prize for economics. It was Dr. Tobin's view that the world economy was being disrupted by currency speculation in which money moved around the world as bets on the fluctuations in exchange rates. He believed that the imposition of a small tax on every currency transaction would disrupt the currency gamblers, while imposing a trivial burden on those legitimately engaged in foreign trade or long-term investment.
Expanding on the idea of a currency speculation tax, wouldn't it be more sensible and much fairer to simply tax the movement of all money in the U.S. economy--instead of taxing personal and corporate income? Not a sales tax, not a value-added tax, not a flat income tax, not even a speculation tax, but rather a simple toll on every single financial transaction that occurs within the economic system. Not just every time someone buys a pack of chewing gum, but every time stocks and bonds are bought and sold, every time currencies and derivatives are traded, and every time General Motors buys a new robot to replace its assembly-line workers.
In one year (2012), the Chicago Board of Trade processed nearly three billion contracts that were worth approximately $1 quadrillion in notional value. In 2013, the daily trading value of transactions at the New York Stock Exchange exceeded $169 billion, or $42.5 trillion during the year. In order to maintain liquidity requirements, banks make overnight short-term loans to each other amounting to approximately $200 billion each day, or $50.4 trillion each year. One percent of these transactions--alone--would amount to almost $11 trillion dollars a year.
Since the working-, middle- and small-business-classes have far fewer and much smaller financial transactions, the wealthy and the multinational corporations--who spend a lot of money to avoid having any "taxable" income--would have to share proportionally in paying the toll for their traffic on the economic highway and their use of the People's courts and institutions to enforce their contracts and to facilitate their profits. Why should so many of the largest corporations completely escape the payment of any taxes?