Tobin Tax

In 1970 more than 95 percent of currency trades were for activities linked to what many call the "real economy" -- investment, tourism, foreign aid, trade. Today only two percent are. The volume of currency trading is now some 50 times greater than the volume of trade in goods and services. We trade more than $100 worth of stock and bonds for every dollar raised for investment in new plant and equipent, a ratio almost four times greater than 30 years ago.

This delinking of money from place and productive investment is not the inevitable result of technological advances or economic evolution. Money is a human invention and rules that control its dynamic are also a human invention. To slow down the speculative and destablizing flow of money, John Maynard Keynes proposed a small financial transaactions tax in 1930. In the 1970s, Nobel Prize winning economist James Tobin proposed a tax on international financial transactions. The modest tax could dampen volatility and encourage longer term investment. Today traders hold assets for a few hours, or even a few minutes. They are happy with a very small return on each trade

Financial transactions taxes are in place in more than 15 countries. The U.S. had a financial transactions tax from 1914 to 1966 but then reduced it to a trivial .004 percnet tax only on stock transfers to generate revenue to support the operations of the Securities and Excahnge Commission. Recently there has been renewed interest in such a tax on international financial transactions.

In March of 1999, a Canadian resolution calling for a Tobin tax passed in the Canadian Parliament. A similar resolution was narrowly defeated in the European Union's Parliament. Currently underway is an international initiative calling on parliamentarians around the world to enact a Tobin Tax, and a world economists call for a Tobin tax initiated in the summer 2000. In the U.S., a resolution supporting such a tax was introduced by Congressman Peter DeFazio (D-OR) and Senator Paul Wellstone (D-MN) in April 2000. On a local level, a growing number of "Tobin towns" are passing resolutions in favor of a Tobin tax. Over 50 towns in France and the town of Arcata, CA have passed such motions. During the summer of 2000 the Town Council of Genoa (Italy) voted to approve a motion to levy a tax on financial transactions. Below is the official text of the Genoa resolution, translated from Italian. The original text can be found on the Carta website , with a commentary by the Vice-President of the Township of Genoa, Antonio Bruno.

A Resolution by the Town Council of Genoa

The Town Council, considering that since financial globalization increases economic insecurity and social inequality, duping and humiliating the decisions of the people, of the democratic institutions and of the sovereign States responsible for the general interest, it is necessary and possible for the citizens to make public interest prevail over the interest of the financial markets and multinational enterprises; engages the Mayor and the council to obtain that the Italian government and members of the European Parliament uphold and endorse the following proposals :

- that a tax be levied on all financial transactions, particularly those based on speculation, and that the revenue from this be directed to the fight against inequality and unemployment. - that this tax be accompanied by measures of transparency and the dissuasion of financial criminality and tax havens, above all those situated in Europe.

- that the Government take an exemplary initiative in this direction, opening a debate on these themes in Parliament and in the country, and demand that they be put on the agenda of an ordinary, or special, meeting of the European Council.

- that the Government refrain from signing any agreement or treaty of the type Multilateral Agreement on Investment (MAI) or the Transatlantic Economic Alliance (TEP), which weakens democratic sovereignty in favour of the transnational economic and financial sphere. - that the Central European Bank be subject to the political control of Parliament and of the governments of the European Union.