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Liberal-minded economists are usually skeptical of taxation: taxes distort markets and lead to the inefficient allocation of resources. However, some taxes are better than others, and financial transaction taxes, such as the Tobin Tax, are certainly in that category.
Now, the European Commission is getting serious about introducing a financial transaction tax. Their proposal: levy a tax of 0.1% on every financial securities transaction performed by a financial institution based in the EU.
Your humble blogger would have appreciated an invitation to this year’s World Economic Forum (WEF). Unfortunately, no such letter landed in my mailbox. No matter, I probably couldn’t have accepted anyhow.
The entry-level $71,000 price tag, it turns out, – travel, room, board and entertainment excluded – is a smidgen out of my league. Good thing that the WEF publication Global Risks 2011 calls attention to economic disparity (aka income and wealth inequality), both within and between countries, as the most pressing risk out there today. Are the plutocrats beginning to feel the heat?
In America, home to the highest economic inequality in the developed world today, the winds of change may have started to blow.
The American Right has for the past 30 years effectively existed as an alliance of convenience between middle-class social conservatives from the American heartland on the one hand, and members of the corporate and financial elite intent on hoarding cash on the other. The informal arrangement has proved remarkably durable, at least up until the Great Recession.*
The social conservatives got politicians who extolled the virtues of American family values, promoted constitutional bans on gay marriage and abortion, and never missed an occasion to exalt America’s exceptionalism. The corporate and financial elite got ‘Benjamins’, lots of them. To make the economics attractive, the corporate and financial elite promised what George H W Bush in 1980 mocked as ‘voodoo economics:’ tax cuts, tax cuts and just when you though there couldn’t be any more, tax cuts. This all coincided nicely with America’s unipolar moment in the post-Cold War period.
The perception was that tax cuts would pay for themselves and would only work to make everyone wealthier. In the short term they did, but over time they led to the bifurcation of American society. Legislators with the help of lobbyist disproportionately targeted the tax cuts to benefit the top income brackets, and massively so. The socially conservative wing, blinded by its reactionary ideals, got duped. Its followers have effectively voted time and again against their own economic interests.