The following represents a dual approach to raise additional tax revenue that the United States.
Part 1: 1% Tax on all Financial Market Transactions.
On January 20, 2009, the Dow Jones market closed at 7949.09. On February 27, 2014, it closed at 16,273. While the U.S. job market and middle America are struggling, the stock market is booming, in part, thanks to federal bailouts of multiple large financial institutions financed by American citizens.
In 2009, the Center for Economic and Policy Research published a study called the Potential Revenue from Financial Transactions Taxes. In it, the group states clearly:
“…transactions taxes could raise $353.8 billion annually based on 2008 trading volumes. If trading fell by 50 percent in response to the tax, then the tax would raise $176.9 billion.”
This is at a tax rate of half of one percent, or 50 cents on every $100.00. Extrapolating from these numbers is easy. At a one percent tax rate, you double it, or generate between $353.8 billion per year, if trading fell by 50 percent, to $707.6 billion per year, if the trade rates stayed at 2008 levels. There would be no allowable deductions, exemptions, or loopholes to this plan.
Part Two: Ban Off-Shoring of Profits generated in the United States:
Cornell University Law School defines Tax Evasion as:
Tax evasion is using illegal means to avoid paying taxes. Typically, tax evasion schemes involve an individual or corporation misrepresenting their income to the Internal Revenue Service. Misrepresentation may take the form either of underreporting income, inflating deductions, or hiding money and its interest altogether in offshore accounts.
To me, off shoring taxable income generated in the United States to other countries amounts to evading taxes. That is the company’s goal… to pay less taxes. So, corporations and wealthy individuals successfully lobbied to legalize this crime for their own gain.Reuters from 2012, wealthy Americans and companies hold an estimated $21 trillion to $32 trillion in offshore accounts. Huffington Post reported that the United States loses $150 billion a year due to the off-shoring of profits and wealthy individuals’ money.
If the company or individual earns income in the United States, it makes sense that they should pay the United States taxes on that domestically-earned income.
Just implementing these two solutions, alone, would generate somewhere north of $500 billion to $850 billion in tax revenue per year, which would go along way to address the United States deficit.
Photo Credit: Andrew Kelly / Reuters