Democrat Presidential Candidate Joe Biden May be Considering a Financial Transactions Tax

Michael Volpe

After spending a decade in finance, Michael Volpe has been a freelance investigative journalist since 2009. His work has been published locally in the Chicago Reader, Chicago Crusader, Chicago Heights Patch, and New City. Nationally, Volpe's work has appeared in a wide variety of publications including the Washington Examiner, the Daily Caller, Crime Magazine, the Southern Christian Leadership Conference Newsletter, and Counter Punch. Volpe has been recognized by whistleblowers as leading the charge in getting their stories out. His first book Prosecutors Gone Wild was published in October 2012, his second book The Definitive Dossier of PTSD in Whistleblowers was published in February 2013 and his third book Bullied to Death was published in August 2015.

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Democrat Presidential Candidate Joe Biden May be Considering a Financial Transactions Tax

September 30, 2019

WashingtonThe Washington Post reported earlier that the candidate is considering a tax on a financial transactions tax

“Advisers to presidential candidate Joe Biden are weighing the introduction of a new tax on Wall Street, according to people familiar with the discussion, as the former Vice President now stands alone among the Democratic front runners in not backing a multi-trillion ‘dollar’ wealth tax on the richest Americans.

“The plan under consideration from Biden’s advisors could tax financial transactions such as the sale of stocks and bonds, one advisor said.”

Another Democratic presidential candidate, Bernie Sanders, has already backed a financial transaction tax.

Sanders noted in May in introducing his plan, “Just over ten years ago, the greed, recklessness, and illegal behavior on Wall Street caused the worst financial crisis since the Great Depression. Millions of Americans lost their homes, life savings, and ability to pay for college because Wall Street speculators crashed the economy in 2008.

“During the financial crisis, the taxpayers of this country provided Wall Street with the largest bailout in the history of the world – $700 billion from the Treasury Department and $16 trillion in total financial assistance from the Federal Reserve”

Biden’s plan is part of Democrat’s leftward lurch.

Both Sanders and Democratic candidate have also proposed a wealth tax.

Sanders’ plan would tax three percent of wealth of those with net worth of $32 million and more. Here is part of Sanders’ explanation.

“This wealth tax would only apply to net worth of over $32 million and would raise an estimated $4.35 trillion over the next decade. Anyone who has a net worth of less than $32 million would not see their taxes go up at all under this plan.

“The revenue raised under this plan would be used to fund Bernie’s affordable housing plan, universal childcare and would help fund Medicare for All.”

Warren’s wealth tax would tax two percent of all net worth of $50 million and more.

The plans, if it was implemented, would likely force the really wealthy to sell off assets including some of their stock portfolio as most with net worth of tens of millions have it tied up in assets like stocks and real estate.

Countries like Sweden, Italy, and France have all previously implemented a financial transactions tax.

Americans for Tax Reform ran an analysis arguing against the tax, “Ideal tax policy should be economically neutral by taxing income once (ideally at the point of consumption).

“However, the FTT would be an additional layer of taxation on top of existing capital gains taxes, individual income taxes, and corporate taxes.

“Because it is levied on a transaction, this tax could be imposed on the same financial instrument multiple times. In addition, the FTT would often be imposed at the same time as the capital gains tax – tax would be paid on the act of selling the asset and also on the gain of the asset.”

Meanwhile, an article in Bloomberg argued in favor of the tax, “Opponents of the tax offer two main arguments. First, they say the burden will fall mostly on small investors. Second, they say it will undermine the ease of buying and selling — or liquidity — that makes U.S. markets so attractive, and impair those markets’ ability to determine the proper prices of securities.

“Let’s examine the first claim. The idea is that regular folks mostly invest through mutual funds, which trade a lot and hence will get hit hard by the tax. Specifically, in a letter to legislators, the Investment Company Institute estimated that the tax would impose a 60% average cost increase on investors in equity index funds.

“That calculation is specious at best. It implies, for example, that the typical investor holds an index fund for less than six years. According to the ICI, this is based on purchase and sale data from 2018 — a year in which the funds experienced large redemptions from retiring baby boomers and vast inflows from investors looking to reduce their fees.

“Actually, people who invest in index funds for their retirement tend to be long-term buy-and-hold investors. An investment at age 35 might be withdrawn at 65, which suggests a holding period of about 30 years — or even longer if the money is funding a bequest. Given that horizon, the average tax per year is less than one-hundredth of one percent, which would increase the typical index-fund fee by only 8%. The tax on the funds’ own trading might add a little to this, but not much.”

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