Beloved fictional character Robin Hood has seen a recent cultural revival, but not in the form of another Hollywood attempt to make money by retelling his story.
Protestors internationally have been shouting his name as the moniker for a controversial new tax proposal that is gaining momentum. The so-called “Robin Hood Tax” is based loosely on the philosophy of Sherwood Forest –
robbing from the rich and giving to the poor.
The idea is pretty simple: enact a Financial Transaction Tax. Affluent people exchange huge amounts of money in the market every day. This money is traded in the form of stocks, bonds, currency, commodities, futures and options. The FTT would tax these types of monetary transactions.
The most common scenario has been a proposal to levy a tax of anywhere from $3-$10 for every $10,000 transaction. The idea is similar to the Tobin Tax on foreign exchanges proposed by acclaimed economist James Tobin in the 70s.
The proposal has gained considerable support in the last few years. Notable advocates include billionaires George Soros and Bill Gates, social activist Ralph Nader, former vice president Al Gore, Pope Benedict XVI, German chancellor Angela Merkel, French president Nicolas Sarkozy and many others.
Gates recently made a presentation at the G-20 summit. Therein, he said a small levy along the lines of the Robin Hood tax could annually generate $48 billion to send to developing nations worldwide.
The proposal has also gained support from unions and the Occupy Wallstreet Movement. Union leaders and Occupy activists argued it would help level the economic playing field by nationally alleviating the financial strife of the poor.
Critics of the proposal, including Britain’s prime minister David Cameron and the Obama Administration question the proposal’s prudence.
Cameron said he was in favor of the idea, but said he would not support it unless it were implemented worldwide.
He argued if it were enacted nationally or even regionally, it would serve to do little more than drive
investment and trading to other areas of the global economy.
British lawmakers convened early this month to discuss the FTT and supported Cameron’s position. They argued that an FTT could potentially cost the British economy anywhere from five to 20 times the amount of revenue it would raise.
The Obama Administration agreed with the proposal in spirit, but echoed Cameron’s concerns and added that the tax would be difficult to execute and could potentially burden investors and banks, further damaging the economy.
Despite the administration’s concerns, Tom Harkin, Democrat Senator from Iowa, and Peter Frazio, Democrat representative from Oregon, have proposed a tax that would generate $350 billion of revenue for the U.S. over 10 years. Their version of the FTT would levy $3 for every $10,000 transaction.
Tim Worstall of popular financial magazine Forbes published a report criticizing the proposal.
“The FTT [Financial Transaction Tax] would not increase revenue collected. Indeed it would reduce total revenue by shrinking the overall economy,” Worstall said. “Finally, those who would carry the economic burden of the FTT would not be the banks but workers and consumers in general, and their burden would be more than 100 percent of the revenue raised by the FTT.”
According to the New York Times, taxes similar to the FTT already exist in Britain, Hong Kong and Singapore.
