An expanded version of the Tobin tax first proposed by Nobel winning economist the late James Tobin in 1972 has been renamed the Robin Hood tax and already has the support of the British Prime Minister, the German Chancellor and the French President. It also has the support of hundreds of economists.
Another Nobel winner, American economist Paul Krugman; and former World Bank economist (and now a critic of it) Joseph Stiglitz both back some kind of Tobin tax. Oxfam, the World Development Movement and many other charities and trade unions on both sides of the Atlantic and the Channel back the Robin Hood tax.
The tax would be on large scale currency transactions by banks and other financial institutions, most of which are speculative (i.e basically gambling on a huge scale). So it wouldn’t affect buying some currency for a holiday for instance. The proposed rate is about 0.05% - a very low rate but enough to bring in considerable tax revenues given the vast size of many currency transactions. (The ‘Robin Hood Tax’ covers some categories of transaction not covered by the original Tobin tax – perhaps because new forms of currency and stock market speculation have developed since the 1970s)
The tax would discourage currency speculation, like the current speculative trading on the Euro or the run on the pound on Black Wednesday in the 1990s, by making it less profitable. At the same time it would generate large amounts of tax from big banks, hedge funds and other large firms which would mean first that if banks went under again the tax would mean they would be paying for their own bail-outs – and it would leave plenty left over to spend on helping the poorest, education and protecting the environment we all rely on for our survival.
The Obama government has been being lobbied heavily by the hedge funds, the banks and their representatives in ‘free market’ (read oligopoly) ideologue groups like ‘The Heritage Foundation’.
A Mr. Duvet (was that name chosen to sound warm and safe during cold weather?) was a spokesman for the Heritage Foundation on the UK’s Channel 4 News a few months ago. He explained that the 0.05% tax (half a per cent) was more than the banks and the hedge funds (massive gambling outfits) could bear. (After all they’d only just been bailed out for billions). He went on to suggest a VAT tax be introduced in the US, presumably on the grounds that the Heritage Foundation couldn’t give a toss about the effect of a tax with no relation to income on the vast majority of people.
On 8th November 2009 Obama’s Finance Secretary Timothy Geithner rejected the Tobin tax saying “A day-by-day financial transaction tax is not something we are prepared to support” and that the economy required a stimulus rather than more taxes.
Obama’s falling approval rating in the US and the Democrat’s loss of Ted Kennedy’s seat to a Fox News and Tea-Party backed Republican may change that yet though. Immediately after the loss of that seat Obama announced that banks taking deposit accounts would not be allowed to continue hedge funds and other speculative operations – they would have to become separate firms. He may yet be open to being persuaded that a Tobin or ‘Robin Hood’ tax won’t do his poll ratings, his election results or his prospects of reducing the US budget deficit any harm.
To read more or to sign up as a supporter of the Robin Hood tax go here.