Are Higher Taxes the Solution to Obscene Wall Street Profits?
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Ezra Klein uses some charts and graphs to demonstrate how profits and compensation have skyrocketed on Wall Street, and concludes:
The Dodd and Frank bills are not about changing how the financial sector works so much as changing how it’s regulated. And there’s a real need for regulation modernizing the powers of regulators, so that’s not necessarily a bad thing.
But the question is whether that’s a sufficient thing. Whether we also need legislation that is decidedly not in the financial sector’s best interest. Legislation that brings down their share of total domestic profits and forces down their relative wages and makes it less lucrative for smart college graduates to rush into investment banks. Legislation that leaves firms that are smaller and easier to unwind and that doesn’t offer massive rewards to people who develop complex and untested products and then sell them to other people who know even less about them. A financial industry, in other words, that looks more like the one we had after the Great Depression than before.
I don’t really understand this progressive passion for trying to micromanage the structure of the American economy. Consider two problems:
— Financial institution failures that cost taxpayers billions.
— Run-amok income inequality.
The policy response to the first is “regulation modernizing the powers of regulators.” And the policy response to the second is higher taxes to finance more and better public services. Is there really some third problem that trying to make Wall Street less profitable addresses? At the end of the day, insofar as people want to entrust their money to greedy risk-taking bankers, I would rather have those bankers be located in New York and paying taxes to the IRS that finance great schools and shiny new mass transit systems than have the bankers be located in Zurich and financing their schools and transit systems.
A financial system that poses systemic risks is a threat to the whole economy, and that’s what this legislation addresses. Inequality and the absence of social justice is also a big problem, but I think it’s a problem you address through taxes, transfers, and public services not through financial regulation.
Source: Think Progress...
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Krell, as fourdinners might say Spot On!
They make nothing but paper profits. When you think about it,all they (banks)really need to do is put “not needed right now” money with “I need $ bad right now” people.
I recall there’s something called a Tobin Tax, which would put a .25% or such tax on all stock/bond transactions? maybe that could be used such that no matter where they were located they would still pay that small tax?
4Dinners….I had that album! Vinyl even, great stuff!
Ezra Klein? Here we go again with your daft names. Sounds like some kind of disinfectant to me….
“Can’t clear those unsightly skid marks from your lavatory bowl? Use new improved Ezra Klein!”
I like Wall Street. It reminds me of my youth and 10cc…..
…after three…one, two, three….
“Do the Wall Street shuffle” DUDUDUUUUUU
“Hear the money rustle” DUDUDUUUU
“Watch the greenbacks tumble” DUDUDUUUU
“Feel the Sterling crumble”
Marvellous. Bloody marvellous stuff!!
Once upon a time, there was a land full of loopholes, then they busted out the guillotine.
I have a couple of problems with Wall Street right now that I feel needs to be address…
One is the combining of Investment banking with banks that can get money that is insured by FDIC. This allows them to take high dynamic investments without the negative risks. We have in effect socialized the risks while maintaining the privatization of profits.
Another is the policies that are creating this enormous wealth, while not actually producing a tangible product, is affecting stability of the country.
As the manufacturing base is being shipped overseas, the effect of that on the wealth of the nation is being masked by “smoke and mirrors” profits of Wall Street. Tangible goods don’t just disappear overnight and this acts as a stabilizing agent on the countries economic well-being.
Wall Street profits can be quite emotional, affected by investor jitters or something totally unrelated, causing an avalanche effect that can destroy billions of dollars of wealth overnight.
As far as taxing their profits, that idea would be delusional. They don’t pay taxes on the profits with the laws they have now. Research how many investment companies and derivative portfolios are actually registered in the Cayman Islands.
These guys are the best of the best when it comes to avoidance of wealth disbursement. They would have loopholes to any new laws figured out before the ink dried!