Tax the Speculators!
How a Two-tenths of One Percent Sales Tax
On Financial Securities Will Generate
$10 Billion to $40 Billion for Pennsylvania
A bill to create a "Securities Transfer Tax" was introduced into the Pennsylvania House of Representatives June 27, co-sponsored by five Democratic House members. House Bill 2833 calls for a two-tenths of one percent tax "on the sale or transfer of any bond, stock, security, future, option, swap or derivative." See the full text of the bill below.
In a memo to all House members, the primary sponsor, Rep. Harold James (D-Phila.), said that "the proposed tax has the potential to generate susbtantial revenues for the Commonwealth, because of the massive volume of trading in financial markets today. This proposed tax will also allow the Commonwealth to meet its responsibilities to our working poor and disabled citizens, and to restore budget cuts which threaten the health and lives of our constituents." Representative James is chairman of the Pennsylvania Legislative Black Caucus.
Along with prison work camps, and extermination of the sick and "mentally ill," the Nazis were infamous for the "Big Lie" technique--repeat a very big lie often enough, and the people will believe it; the average gullible fool will support the most horrible of crimes, as long as those crimes are justified by a Big Lie.
Governor Ridge used the Nazi Big Lie technique to justify cutting 220,000 poor and disabled Pennsylvanians off medical assistance, knowing this would result in inhumane treatment and wrongful deaths of citizens. The cuts are necessary, Ridge lied, in order to "save" $250 million and "balance the budget."
"Pennsylvanians are tired of wasteful spending," Ridge raved, when his health cuts passed the House May 16. "Taxpayers have called upon Harrisburg to make the tough choices."
The state budget, unlike the federal government, must be balanced every year. But what Governor Ridge omits to say, is that the current state "budget deficit" was caused directly by over $300 million in big business tax cuts demanded by Ridge in the past two years. The real reason that innocent people must suffer and die, is to pay for Ridge's massive corporate tax breaks. In the longer term, the shortfalls require reindustrialization, and a tax policy based on discouraging short-term speculation, and encouraging the creation of union-scale jobs for rebuilding the country.
The truth is, that the money is readily available not only to "balance the budget," with no harm to the lives or health of citizens, but also to expand necessary services and create productive jobs. The simple draft bill below, for a miniscule .2 percent (two-tenths of one percent) sales tax on financial transactions, would raise at least $10 billion for the Commonwealth of Pennsylvania, which is almost equal to the total $16 billion state budget for 1996-97!
Unlike ordinary purchases made in a department store, for example, which are subject to a 6 percent sales tax in Pennsylvania, there is currently no sales tax at all on financial securities.
How a Financial Securities Sales Tax Would Work
A tax on financial transactions will have little or no effect on the ordinary taxpayer. For example, even if a person sold an investment portfolio worth $100,000, a two-tenths of 1 percent sales tax would amount to only $200. The people who will pay the most, are those professional speculators who buy and sell billions of dollars of stocks and securities every day.
Financial speculation is destroying the economy of the nation and the world. Since such big profits can be made from gambling on financial markets, money has been sucked out of investment in industry, agriculture, health, education, and productive employment. A tax on financial transactions will target this destructive activity, and encourage long-term investment and real economic growth. It will also provide revenue for the Commonwealth to improve services, and create productive jobs in needed public works and infrastructure.
In the U.S. Congress, Speaker of the House Jim Wright (D-Tex.) proposed a 1 percent tax on financial transactions in 1987, before he was driven from his office by Newt Gingrich. In 1990, then-Senator Lloyd Bentsen (D-Tex.) proposed a similar tax, and the Congressional Budget Office issued an analysis of a 0.5 percent tax on the transfer of securities as a source of revenue. Lyndon LaRouche was the first to call for a .1 of 1 percent tax on sales of derivatives in 1993, but this was blocked when Gingrich became House Speaker after the 1994 elections.
We need national action on this approach of taxing speculation, an approach which Senators Daschle and Bingaman have previously mooted. But, in order to stop the murder of the poor and sick, there is every reason to start here in Pennsylvania.
The best estimate of the total volume of stocks, bonds and derivatives sold in a year, is between $100 trillion and $400 trillion nation-wide. Since Pennsylvania has about 5 percent of the total U.S. population, the volume of financial securities traded by state residents can be estimated as about 5 percent of the national total, or at least $5 trillion to $20 trillion a year. So, a two-tenths of one percent sales tax in Pennsylvania would raise between $10 billion and $40 billion!
COMPARISON OF TAX RATES AND REVENUES IN PENNSYLVANIA Tax Rate Annual Revenues -------- --------------- Sales 6.0% $ 5.8 billion Personal Income 2.8% $ 5.4 billion Corporate Net Income 9.99% $ 1.5 billion Liquor 18% $125 billion Financial Transactions 0.2% $10-40 billion
Lyndon LaRouche proposed this solution in a Philadelphia press conference April 4. In rejecting this alternative, Governor Ridge has exposed the truth about his criminal actions.
The truth is, that Governor Ridge's budget plan has nothing to do with "balancing the budget." Governor Ridge has acted to commit Nazi crimes against humanity, in order to protect the obscene profiteering of super-rich Wall Street speculators and corporate rip-off artists, whose financial schemes have bankrupted and looted the economy of the nation and world.
Pennsylvania House of Representatives Bill 2833
The Securities Transfer Tax Act
Amending the Act of March 4, 1971 (P.L. 6, No. 2), entitled "An Act relating to tax reform and State taxation by codifying and enumerating certain subjects of taxation and imposing taxes thereon; providing procedures for the payment, collection, administration, and enforcement thereof; provding for tax credits in certain cases; conferring powers and imposing duties upon the Department of Revenue, certain employers, fiduciaries, individuals, persons, corporations and other entities; prescribing crimes, offenses and penalties," imposing a tax on the seller or transferer of certain bonds, stocks, securities, and various derivatives.
THE GENERAL ASSEMBLY of the Commonwealth of Pennsylvania hereby enacts as follows:
Section 1. The Act of March 4, 1971 (P.L. 6, No. 2), known as the Tax Reform Code of 1971, is amended by adding an article to read:
ARTICLE XI-E SECURITIES TRANSFER TAX
Section 1101-E. Short Title.--This article shall be known and may be cited as the Pennsylvania Securities Transfer Tax Act.
Section 1102-E. Legislative Purpose.--It is hereby declared to be the legislative intent to provide a disincentive to financial speculative activity destructive to the economic well-being of this Commonwealth and its citizens; to encourage stable investment and job creation; and to enhance Commonwealth revenues without harm to the lives and health of the people.Section 1102-E. Definitions.--The following words when used in this article shall have the meanings ascribed to them in this section:
"Bond." A certificate or evidence of a debt on which the issuing company or governmental body promised to pay the holders of that bond a specified amount of interest for a specified length of time and to repay the face amount of the bond on the expiration date.
"Derivative." A financial security whose value is linked to an underlying asset."
"Future." A derivative involving an agreement to buy or sell a commodity or financial instrument sometime in the future.
"Option." A derivative involving an agreement that conveys the right, but not the obligation, to buy or sell a particular commodity or financial instrument at a certain price for a limited time.
"Security." A written instrument which meets all of the following criteria:
- Is issued in a bearer or registered form.
- Is of a type commonly dealt in upon securities exchanges or markets or commonly recognized in any area in which that security is issued or dealt in as a medium for investment.
- Is either one of a class or series or by its terms is divisible into a class or series of instruments.
- Evidences a share, participation or other interest in property or in an enterprise or evidences an obligation of the issuer.
"Stock." A written certificate which evidences the right of the holder thereof to participate in the general management of the issue and to share proportionally in the issuer's net profits or earnings and in the distribution of assets on dissolution.
"Swap." A derivative involving an exchange of payment obligations between two or more parties.
Section 1103-E. Imposition of Tax.--
- Except as provided in section 1104-E, there is hereby imposed on the sale or transfer of any bond, stock, security, future, option, swap or derivative a tax payable by the seller or transferer.
- The rate of tax payable by the seller or transferer shall be as follows:
- Two-tenths of one percent of the face value of any stock, bond, or security.
- Two-tenths of one percent of the value of the underlying asset supporting any derivative, future, option, or swap.
Section 1104-E. Exemptions.--The provisions of this article shall not apply to any bonds or securities issues by the Federal Government or the Commonwealth.
Section 1105-E. Regulations.--The Department of Revenue shall promulgate all regulations necessary to implement, administer, and enforce the provisions of this article.
Section 2. This article shall take effect January, 1, 1997.
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