The Financial Transactions Tax (FTT), also known as the Robin Hood Tax, has been attracting a lot of attention lately. In the midst of a global economic crisis and growing concern about those who are disproportionately feeling its pinch, the FTT – a small (0.05%) tax on financial market transactions such as derivatives, shares, currencies and bonds that could generate billions of dollars to fund poverty reduction and fight climate change – has emerged as a relatively straight-forward way to at least begin redressing the situation.
When the leaders of the world’s major economies met at the G20 Summit in France earlier this month, the FTT was one of the issues up for debate. While the proposal to implement an FTT didn’t receive enough support to pass, encouraging progress was made. A growing number of global players including France, Germany, Spain, Brazil, Argentina, South Africa, Ethiopia, the African Union and the European Commission expressed their support for an FTT. Even religious leaders joined the movement, with the Vatican’s Council for Justice and Peace and Archbishop of Canterbury Rowan Williams issuing statements in support of the FTT. Some proponents have speculated that the FTT could be realized in the not-so-distant future.
Not surprisingly, the Canadian government has remained one of the strongest opponents of the FTT, standing by its claim that the tax would hinder economic growth. It’s all part of a growing trend where taxes have become a “four-letter word”. As we witnessed in our last federal election, almost no one wants to talk about the dreaded “t” word; it’s a race to the bottom in a world where low-taxes rule the day.
Yet taxes demand discussion. Amidst a fragile economic environment and budgetary deficits, governments, including Canada’s, have been touting austerity measures (i.e. budget and program cuts), rather than increased revenue, as the solution. Decrease government spending and the problem’s solved. Or so the rationale goes.
But as former chief economist of the World Bank Joseph Stiglitz has pointed out, government budget cuts in place of taxation comes at a heavy cost.1 While such measures may seem to be an effective way to balance the books, they’re not. On the contrary, austerity leads to slower economic growth, fewer jobs, and, therefore, less government income.
Austerity alone is the wrong approach. We need revenue-side solutions. Increasing government revenue both stimulates the economy by enabling public investment in physical infrastructure, education and jobs, and ensures that government is able to fulfill its responsibility to provide the social infrastructure to care for our citizens, reduce poverty, and protect the environment.
Public justice demands that we actively promote the social structures and associations that contribute to the common good. Whether as individuals or corporations, one of the primary ways we can fulfill this responsibility is through paying taxes. The FTT is an innovative example of the sort of policy solution we need to enable government to promote the common good and improve all of our economic and social well-being, both at home and abroad.
In addition to advocating for an FTT, CPJ has highlighted a number of policy recommendations to provide government with sufficient revenue to carry out public justice responsibilities, including:
- Reversing corporate tax cuts. The scheduled 2012 corporate tax cuts will result in a loss of $3 billion in government revenue annually, or a whopping $13.7 billion annually when compared to the rate in 20072. What’s more, evidence shows that despite claims to the contrary, corporate tax cuts don’t necessarily result in more jobs or economic growth.3
- Repealing the GST reductions. The 2006/08 GST cuts cost $10-12 billion dollars in lost revenue annually.4 The GST cuts also unequally benefited the wealthy since, as a consumption tax, the more someone spends, the more they save.
- Creating a fifth tax bracket for incomes over $250,000. High income earners should be contributing their fair share of taxes.
- Redefine taxable income to include sources that are currently partially or fully exempted such as capital gains, dividends, gifts, and inheritances.
- Introduce a carbon tax to encourage the development of green practices and technologies.
Taxes are one of the most important ways we can contribute to building a just, equitable society and pursue the common good.
- 2. http://www.taxfairness.ca/sites/taxfairness.ca/files/pdf/fact_sheet_1_co…
- 4. http://www.policyalternatives.ca/publications/commentary/taxes-new-black… href=”https://www.policyalternatives.ca/publications/commentary/taxes-new-black