A panel of reporters led by MSNBC’s Chris Matthews agreed Saturday that Sen. Bernie Sanders’ plan to use a tax on financial transactions to pay for tuition at public colleges is cheap, pie-in-the-sky pandering with little merit as public policy.
Their analysis did not mention the credible studies that project a financial transactions tax, aimed at discouraging speculation, would be a major source of revenue for the U.S. government. Nor did they note the many countries where such a tax has already been successfully implemented.
Instead, Matthews, MSNBC’s Alex Seitz-Wald and Reuters’ Luciana Lopez argued that Sanders’ plan and its appeal to voters grow out of a kind of childish naivete that fails to acknowledge tough realities.
Here is the full exchange:
Chris Matthews: Seriously, seriously about this. Bernie says he’s going to pay for the free tuitions at all the great state universities with something called a tax on Wall Street speculation. That sounds great. We’ll screw the bad guys.
But then I ask the people, ‘What do you mean by a tax on Wall Street speculation?’ They said, ‘Well, every time you buy or trade $100 worth of stock, you pay 50 cents or whatever,’ right? So all of a sudden, your 401(k), your mutual fund, everything your grandparents have invested in is now getting taxed as you go in the door. … That doesn’t sound like Wall Street speculation. It just sounds like taxing anybody that’s going into the equity markets. That sounds like a lot of taxing.
Alex Seitz-Wald: She [Hillary Clinton] is right on all these things if you dig down, but it’s the vegetables. She’s trying to sell broccoli and Bernie Sanders is selling ice cream. You’re gonna feel terrible the next day if you eat a lot of ice cream, but for the moment, it sounds pretty good.
Luciana Lopez: Saying to people ‘Wall Street speculation’ — everyone has different image of what that is. …
Matthews: Well, speculation is bad.
Lopez: Well, no one is like, ‘My 401(k) is speculation.’ In a way, it gets to be all things to all people, to use these words that people then get to kind of define.
Matthews: Here’s the irony of our time: Everybody hates people who make money off money — captains of the universe, billionaires making money off of other people’s money. Yet everybody who retires and begins to want to save, everyone wants better than the interest rate. And they want somebody who can do that for them.
To be clear, a disproportionate share of any taxes on securities trades would be paid by the super-rich. The top 0.1 percent of earners took in half of all capital gains in 2011.
The panel is right to note, however, that while Sanders frames his tax plan purely as an attack on Wall Street speculators, it would fall on smaller investors as well. But in describing the plan as a short-term buzz that voters would reject if they only understood it, the journalists are missing the sound reasons people are supporting a plan like Sanders’.
The Sanders campaign projects that “imposing a tax of a fraction of a percent” on financial transactions would raise $75 billion a year.
That may actually be on the conservative side. A 2009 report by the progressive Center for Economic and Policy Research found that a 0.5 percent tax on financial transactions would raise $220 billion annually.
Of course, part of the purpose of the tax would be to discourage speculation such as that practiced by Wall Street banks using computers capable of making high-frequency trades. But even if the tax reduced the volume of trades by half, it would still raise $110 billion a year, according to the 2009 paper.
The United Kingdom’s 0.5 percent tax on financial transactions has generated a more modest $4 billion a year, but it excludes the large number of derivatives traded in that country. At the same time, the tax has apparently not made the U.K. less attractive to financial firms: London was the financial capital of the world in 2015, according to one global index.
Then there is the small matter that Clinton herself has proposed a modest tax on high-frequency trading. It is far narrower than Sanders’ proposal. In fact, it is so narrow that many liberal economists and Wall Street reform advocates believe it would be easy for Wall Street to circumvent, doing little to actually diminish high-frequency trades.
That is nonetheless a far cry from Sanders serving up “ice cream” to Clinton’s “broccoli.”
One can also debate the tradeoffs of a financial transactions tax dedicated to paying for tuition at public colleges, as Sanders proposes. But there are many reasons why middle- and low-income Americans might consider it a good deal.
First, the picture that Matthews paints of a public that loves playing the stock market is likely an exaggeration.
Nearly one-third of workers do not even have access to retirement plans through their jobs, according to the Bureau of Labor Statistics. In total, nearly half of all workers do not to participate in employer-sponsored retirement plans.
Less than half of Americans own any stock at all, through a retirement plan or otherwise. And those who have a 401(k) or other kind of employer-sponsored retirement plan might not view it as such a great deal.
The rise of 401(k) plans in the past three decades has not left Americans with adequate savings for retirement. The net worth of those nearing retirement — aged 54 to 65 — in the middle quintile of the earnings spectrum declined significantly from 1989 to 2013.
Meanwhile, the increasing costs of a college education, even at the comparably cheaper state schools that Sanders would make free, have hit people’s wallets hard. Some two-thirds of graduates of public colleges graduated with student debt — $25,550 per graduate as of 2012.