Shake off the finance fever dream and pass a stock tax

The ruling ideas of today are the ideas of finance. The allure of the stock market has affected the minds of elected officials,

Assembly Member Phil Steck, D-colonie, represents the 110th Assembly District. businesspeople, some union leaders, and citizens (witness the Gamestop phenomenon). It’s exactly why New York needs to reinstate a small tax on stock transactions.

Taking its lead from Margaret Thatcher’s Britain, the United States took controls off finance to out-compete the UK. The Fdr-era reforms were undone by both Republicans and Democrats, changing the economy.

In our greatest period of economic growth in the 1950s and 1960s, “assets held by the financial sector in the United States were worth around one year’s GDP, and financial corporations earned little more than a tenth of corporate profits. Now the financial sector’s assets are worth five years’ GDP, and a third of all corporate profits flow to finance,” writes journalistauthor Nicholas Shaxson in “The Financial Curse: How Global Finance is Making us All Poorer.”

Offshoring profits to avoid taxes became commonplace. Increasingly, dark money with criminal or corrupt origins passed through the banking system.

Job growth was disproportionately concentrated in the centers of high tech and high finance. The rest of the country is being hollowed out, notes Italian economist Enrico Moretti in “The New Geography of Jobs.”

This is reflected in the electoral map. Hillary Clinton won the

centers of high tech and high finance because the economy was working. Elsewhere, desperation and rising political instability favored Donald Trump.

When I drove my daughter to her summer class in Boston, I realized how Hillary Clinton defeated Bernie Sanders in the most liberal state in the nation. There was construction everywhere in that center of high finance and high tech. Clinton won Boston but lost everywhere else.

Upstate New York has generally been hollowed out. Whether under Republican George Pataki or Democrat Andrew Cuomo, tax-free schemes failed to produce economic growth. Direct government investment in high tech, such as the nanotech college in Albany, or the chip fab plant in Malta, produced some results. But that comes from direct government spending, not so-called improvement of the elusive business climate.

Leveraged buyouts also killed business upstate. A private-equity firm would acquire an enterprise with money borrowed using the assets of the acquired company as collateral, earning large fees in the acquisition. Then, when things went poorly, assets of the acquired firm were sold off to continue a flow of profits to the corporate raiders. Meanwhile, the debt became unaffordable and simply ate up the enterprise. Many examples are detailed in Donald Barlett and James Steele’s “America: What Went Wrong” in 1991, and continue to this day.

I am often asked why can’t we reinstate the stock transfer tax in New York; it’s a no-brainer. It’s used all over the world. Top economists support it. It is a tax paid largely by residents of other states and nations. New York has 50 percent of all stock trading in the world; 80 percent of trading is now accomplished by computerized algorithmic programs rather than trading for investment. Requiring those folks to give a miniscule five cents for every $100 traded makes sense. It would bring billions of dollars of public investment into upstate. It’s good for business.

The reason we are not doing it, yet, is because the ideology of finance has captured the minds of our decision makers who are susceptible to even the most unsubstantiated threats from finance. It is nonsensical for the stock exchange to incur billions of dollars in cost to move out of New York to escape a tax it wouldn’t even pay (firms would merely collect it from purchasers and remit it to the government).

In 1905, the stock exchange threatened to move to New Jersey to avoid the tax. The New York Times editorialized against it. But courageous Republicans went forward. The volume of trading increased, no harm occurred, and the venerable newspaper admitted it was wrong.