Economic Update with Richard D. Wolff

Episode: “Finally a Tiny Sales Tax on Stocks”

Date: March 18, 2021

Overview

In this episode, Richard D. Wolff addresses recent economic justice proposals focusing on executive pay and the fair taxation of financial transactions. The main focus is the history and current debate over a stock transfer tax in New York—essentially a modest sales tax on stock trades—that could meaningfully address inequality and government fiscal shortfalls. Wolff is joined by guest James Henry, an economist and attorney, who details the mechanics, history, and global context of this tax and counters the main arguments raised by its opponents.

Key Discussion Points & Insights

1. Opening Remarks & Context ([00:10 - 01:55])

• Tributes: Wolff acknowledges the passing of poet Lawrence Ferlinghetti and British social critic Ed Rooksby, expressing gratitude for their influence.
• Main Theme: Addresses economic justice initiatives aimed at redistributing income more fairly and funding public services by taxing excessive CEO pay and stock transactions.

2. CEO Pay Ratio Tax Initiatives ([01:56 - 15:47])

Recent Legislative Proposals

• Hawaii’s Senate Bill 747: Proposes taxing CEO salaries when they exceed 100 times the median worker’s wage.
• Similar Bills Nationwide: Since the Dodd-Frank Act (2018), companies must disclose CEO-to-median-worker pay ratios. Now, nine states and some cities (e.g., Portland, OR; San Francisco, CA) are considering or have enacted related taxes.

Pay Disparity Data

• Historical Context:
  • 1980s: Average CEO-to-worker pay at 42:1 (Bloomberg Businessweek).
  • Recent: AFL-CIO finds the ratio is 264:1 among large corporations.
• Current Examples:
  • McDonald’s: CEO earns $18M; median employee pay is $9,000 (ratio: 1,939:1).
  • Walmart: CEO $22M; median $22,000 (ratio: 983:1).
  • Marriott: 346:1 ratio.
  • Costco: 209:1 ratio.
• Insight: The disparity is not due to merit or productivity but entrenched self-dealing and board structures. “It’s about hustle. This is about deals made between the CEO who usually sits on the board of directors...The CEO participates in making up his own pay. Yup. And that might give you a clue as to why he gets paid so well. Hello. That’s how American capitalism works.” – Richard Wolff ([09:44])

Counterarguments to Corporate Pushback

• Threats to Relocate: Historical threats by CEOs to flee high-tax areas have rarely materialized due to high moving costs and the possibility that new jurisdictions will adopt similar taxes.
• Potential Community Gains: New tax revenues can foster more attractive business environments for everyone, including workers and the broader community.

3. Global Vaccine Inequality ([13:10 - 14:48])

• Vaccine Hoarding: Rich nations, especially the U.S., stockpiling far more vaccine doses than needed.
• Moral & Practical Critique:
  • Quote: “This kind of immorality breeds disaster...In the rush to keep the vaccine in the hands of those who can pay the most, we actually endanger everyone.” – Richard Wolff ([14:30])
  • Globally, as of mid-February 2021, 130 countries (2.5 billion people) had not received a single dose of vaccine.

4. Athletes & Political Speech ([14:49 - 15:47])

• LeBron James vs. Zlatan Ibrahimovic:
  • Zlatan’s Position: Athletes should avoid politics and “do what they’re good at.”
  • Wolff’s Response: Politics affects everyone; silencing voices leads to systems disconnected from people's needs. “No one is to be told to shut up and leave it to the professionals.” – Richard Wolff ([15:24])
  • Praises athletes like LeBron James and Colin Kaepernick for using their platforms for social justice.

5. Stock Transfer Tax: Interview with James Henry ([15:48 - 28:48])

What is the Stock Transfer Tax? ([16:19])

• Explanation:
  • A progressive sales tax (about 0.1%) on trades made on NYSE and NASDAQ.
  • History: Instituted in 1905 by a Republican governor to balance New York’s budget; collected until 1982, after which it’s still on the books but fully rebated to Wall Street investors.
  • Quote: “We've given back about $345 billion to Wall street investors.” – James Henry ([16:55])
• Who Pays?
  • 80% owned by top 10% of Americans; half owned by the top 1%.
  • Much of the tax would fall on wealthy investors both in and beyond New York state.

Amount and Impact ([19:22 - 21:40])

• Comparison to Sales Tax:

  • NY State sales tax: ~8.8% for city residents; stock transfer tax: only 0.1%.
  • Average Transaction Example: $8,400 trade = $8.80 tax.
  • Revenue Potential: In 2020, with $49 trillion in trades, the 0.1% tax could generate enormous sums for public services.

• Rebating & Lost Revenue:

  • Since rebates started in 1982, New York has forfeited hundreds of billions in possible revenue.
  • “It is Robin Hood in reverse. It’s stealing from the mass in order to enrich further those who already have enough...” – Richard Wolff ([21:20])

Wall Street Opposition and Historical Parallels ([21:41 - 23:00])

• Wall Street's Tactics:
  • Threats to relocate echo those made in 1905—proved empty then and now.
  • NY Times initially opposed the 1905 tax but retracted after seeing its positive impact.
  • Periodic repeal efforts failed; the law remains, just not enforced.

International Perspective ([23:00 - 25:19])

• Widespread Precedent:
  • UK has had a 0.2% tax since 1694 (raising $6 billion/year recently).
  • Over 30 countries use similar taxes (e.g., Germany, Italy, France, Brazil, Hong Kong, Kenya, South Africa).
  • EU considering a unified approach.
  • IMF: Claims of economic disaster are “without any foundation.”
  • These taxes are low-cost, hard to avoid, and effective at raising funds.

Practicality & Avoidance ([25:19 - 28:48])

• Legal Robustness:

  • Recent court decisions clarify that simple relocation of data centers doesn't evade tax obligations.
  • Bad experiences elsewhere (e.g., Sweden) due to poor enforcement, not the tax itself.

• Behavioral Effects & High-Frequency Trading:

  • Discourages unproductive speculative trading (“tax casinos”—Keynes and Tobin advocated similar).
  • Pension funds’ concerns are overblown; their costs would be minor compared to the benefit.
  • Most trading is now high-frequency (shares held for <10 minutes), which this tax would slightly deter—beneficial for the economy.

• Final Thoughts:

  • The tax could be a “bellwether” globally given pandemic-era fiscal pressures.
  • “This kind of tax is long overdue.” – Richard Wolff ([28:10])

Notable Quotes & Memorable Moments

• On CEO Pay:

  • “That’s how American capitalism works. It’s what the market will bear. The CEOs have taken care of themselves.”
    – Richard Wolff ([09:44])

• On Vaccine Inequality:

  • “In the rush to keep the vaccine in the hands of those who can pay...we actually endanger everyone.”
    – Richard Wolff ([14:30])

• On Political Speech by Athletes:

  • “No one is to be told to shut up and leave it to the professionals. That’s what they, the professionals may want us to do... But I wanted to be real clear that I’m with LeBron James on this one.”
    – Richard Wolff ([15:24])

• On the Stock Transfer Tax:

  • “We've given back about $345 billion to Wall street investors.”
    – James Henry ([16:55])
  • “It is Robin Hood in reverse. It’s stealing from the mass in order to enrich further those who already have enough to be major players in the stock market.”
    – Richard Wolff ([21:20])
  • “[In 1905] the Times had to retract that editorial because the tax was working so well and so easily. That was helping New York State balance the budget at that time.”
    – James Henry ([22:00])
  • “As Keynes recognized in the 30s, it's not such a bad thing to tax casinos.”
    – James Henry ([27:24])

Timestamps – Key Segments

| Timestamp | Segment Description | |-----------|---------------------| | 00:10 | Wolff opens episode, tributes to Ferlinghetti & Rooksby | | 01:56 | Introduction to CEO pay ratio tax & legislative efforts | | 07:28 | CEO pay ratio examples: McDonald’s, Walmart, Marriott, Costco | | 13:10 | COVID-19 vaccine inequality analysis | | 14:49 | Athlete activism debate: LeBron James, Zlatan Ibrahimovic | | 15:48 | James Henry introduced; stock transfer tax segment begins | | 16:19 | Henry explains the tax’s history, mechanics, and rebates | | 19:22 | Tax compared to sales tax; lost revenue calculations | | 21:40 | Opposition by Wall Street; echoing of historic arguments | | 23:31 | International uses and successes of financial transaction taxes | | 25:19 | Legal and practical arguments about relocation and avoidance | | 27:24 | Role in discouraging high-frequency speculative trading | | 28:10 | Closing statements; importance and urgency of the tax |

Tone & Language

Throughout, Wolff maintains his signature clarity, urgency, and unapologetic advocacy for economic justice. The discussion is accessible but firmly rooted in data and history, punctuated by plain-speaking critiques of corporate behavior and policy absurdities. Both Wolff and Henry use sharp analogies and memorable one-liners to underscore their points, inviting listeners to critically appraise Wall Street’s talking points and the status quo.

Summary

This episode offers a robust critique of income and wealth inequality, using both contemporary and historical examples. It demystifies the stock transfer tax, showing its efficacy, the emptiness of the arguments against it, and its alignment with similar taxes worldwide. Wolff and Henry make a convincing case for why, especially during pandemic-driven fiscal crises, modest taxes on wealthy individuals and institutions are both just and necessary for the public good.