Finally a Tiny Sales Tax on Stocks - Economic Update with Richard D. Wolff

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.

Transcript

A (0:10)

Welcome, friends, to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives. Jobs, debts, incomes, our own and our children's. I'm your host, Richard Wolff. Before jumping into today's program, I want to note the passing of two individuals who taught me a good bit of whatever it is I can offer you in these programs. One was a poet from San Francisco, Lawrence Ferlinghetti, a man who started the famous City Lights bookstore that has been a very important part of that city's life for many, many decades. His poetry, his commitment to social justice. Exemplary. He will be missed. He was a very important person in American history. And the other is Ed Rooksby, a British social critic, died from COVID connected difficulties at the age of 46, but a person with a remarkable level of insight into the problems of modern capitalism. And I want to acknowledge not only that he passed, but the debt I and many others owe to the insights he produced over the years. Okay, let's jump in then to the updates that we have. I want to begin with a bill working its way through the Hawaii legislature. Senate Bill 747, to be specific. It proposes to tax the salaries of CEO chief executive officers if they earn, and to the degree that they earn, more than 100 times the median wage of their employees. Let me remind you, the median wage is that wage where 50% of the workers get more and 50% get less. It's not quite an average, but it's like that in giving you a sense. So this is an important effort and it's going on around the country, which is another reason why I want to stress it to you. Starting since 2018, the Dodd Frank bill, that was that reform bill passed in the crisis of, in the wake of the crisis of 2008, it is now the law that corporations must show the ratio of the pay they give to their highest officer and its relationship to the median of the wages that they pay. Nine states in the United States out of 50 are now considering taxing corporations that pay their CEOs enormous sums. Some of the states want to tax them if they pay more than 50 times what the median worker gets, and some a hundred times and some in between. Two cities in the United States have already done this. Portland, Oregon and San Francisco, had referenda where the voters in those cities passed bills to do exactly this. There were of course, the screams of outrage from high paid CEOs and their supporters threatening that if this happened, they would leave. And again, these threats, as in the past, have proven to be overwhelmingly empty. Theatrical stunts, and there's no hard difficulty in explaining why it's costly to leave. It incurs all kinds of costs. And the joke is, wherever you move to, they're just as likely to pass this in the next few months and years as where you are, in which case you will have wasted those costs and all the dislocations that go with it. Then there's also the problem that to take, for example, the one place that a few folks in Portland and San Francisco did move to, namely Austin, Texas, ended up costing them way more in the collapse of that state's electricity a week or two ago than they saved in not paying this tax, etc. And then there's also the oldest argument of all, that if these taxes are levied, it will enable the communities where the taxes are levied to use the revenue that these taxes generate to do all kinds of things that make it more attractive for businesses to come into the community, for workers to live and work there. And that has to be taken into account, even though the opponents try very hard not to do that. Indeed, in the second half of today's show, you'll see how another proposal, a stock transfer tax, has the same kind of threats and the same kind of empty rhetoric that will be explained by our guest at that time. Okay, I want to give you some background about this issue. Okay? Back in the 1980s, the Bloomberg Business Week combination did a study and reported that the average ratio in large American corporations between what was paid to a CEO and what was received by employees was 42 to 1. Okay? Now, two years ago, the AFL CIO did a study of 500s and P corporations of large corporations where the ratio was 264 to 1. In other words, over the last 40 years, there's been a dramatic increase in what the CEO gets relative to everybody else. They've been cashing in on that difference for 40 years. And now when there's a proposal to tax the difference, they're yelling and screaming. And I wanted to give you an example of the reality here so that no one can fool anyone about it. I'm going to start with what I believe is the strongest example we have for the year 2020. McDonald's Corporation, you know, the hamburger place. The CEO 8 $18 million. Median pay 9,000. Here's that ratio. The CEO gets ready 1,939 times what the median income is. 2,000. The CEO. Let me give you another example and I'll show you what's at stake. Walmart 22 million for the CEO. The median 22,000 there, the ratio is 983. So the CEO of Walmart gets 983 times what the median worker does. But The CEO of McDonald's gets twice that. Is that because the CEO of McDonald's is twice as efficient or twice as productive? Nobody in their right mind believes that. They don't even say such things. And I could give you more examples. In fact, maybe I will. The Marriott Corporation, huge corporation. The ratio, 346 to 1. Costco, another monster company. The ratio there, 209. That's 1/10 of the ratio in McDonald's. And you think the CEO of Costco is only 1/10 as hard working as the CEO of McDonald's? Don't be silly. This is about hustle. This is about deals made between the CEO who usually sits on the board of directors of the company. It's the board of directors that the CEO sits on that decides what the CEO gets paid. Does that mean that 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. It's what the market will bear. The CEOs have taken care of themselves. And if your pay is being pinched and if your pay is low, it's because they have to pay so very, very, very much more to those at the top. That's how the system works. Okay, my next update has to do with what is, on a moral level, an unspeakable situation. The richest countries in the world have an oversupply of vaccine. Here in the United States, the total amount of doses of vaccine that we have stored is over three times the population of the United States. Now that might not be a problem if vaccines were distributed around the world. But as of mid February, according to Nature magazine and the work of Dr. Gavin Yami, who's a professor at the center for Policy Impact in Global Health at duke University. In 130 countries with a total population of 2.5 billion, not a single person had been vaccinated as of middle February. Now, besides the immorality of this, let me for a moment be biblical. This kind of immorality breeds disaster. And it isn't hard to understand why viruses spread. If you don't take care of part of the community and you endanger the part you do take care of, because the disease festers, the viruses mutate, they have the new strains. We're already surrounded by news about this. This is self destructive. In the rush to keep the vaccine in the hands of those who can pay the most for it. We actually endanger everyone. It is an incredible short sightedness that reflects an economic inequality that is going to cost us dearly in death and illness from a disease that we treat in so immoral a way. My last update that we'll have time for today deals with the realm of athletics and in particular a debate between Los Angeles Lakers player LeBron James and a Swedish soccer player. Zlatan Ibrahimovic plays for Milan in Italy. LeBron James is famous for speaking out as an athletic hero about justice, racism. He wants to be, as he says, a voice of the people he comes from and the people who normally don't have a voice because they don't have the reputation, the funds and the opportunities that LeBron James, because of his basketball skill, does have. And he has been doing that quite a bit. Zlatan Ibrahimovic responded by saying, shut up. You should only do, quote, unquote, what you're good at. You're good at basketball, you're not good at politics. You should leave that to the politicians. I would like to respond, I would begin by saying, yeah, we can all see what we get when we leave politics to the politicians. That's where we are now and that's where we have gotten by doing what Zlatan would have us do. Politics was originally an understanding of what concerns us all and therefore what's at stake for us all. It couldn't and shouldn't be a specialized activity. It does in fact need participation by all who can participate. Otherwise it becomes not only the province of the specialist, but you get a politics that's cut off from the needs, the feelings, the requirements of the mass of people, just like we have here in the United States and they have in Italy or Sweden or anywhere else. The people who are hurt by a system have to use the politics of that system to raise their hurts, to explain their situation, to make their proposals to a debate that all of it, 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 and they may be smiling down on Zlatan. But I wanted to be real clear that I'm with LeBron James on this one. I'm glad he's speaking out. I think we have had very, very good consequences from the beginning with Colin Kaepernick's taking of that knee and opening up the space for athletes to show what they feel about what's going on in the society that they play for. That they entertain and that they carry as much of a burden as all the rest of us do. We've come to the end of the first part of today's show. Before we get to the second half, I want to remind you our new book, the Sickness Is the When Capitalism Fails to Save Us From Pandemics or Itself, is available@democracyatwork.info books. I also want to thank our Patreon community for their ongoing invaluable support. If you haven't yet, Please go to patreon.com economicupdate to learn more about how you can get involved. Please stay with us. We'll be right back with our guest, James Hannah Henry. Welcome back, friends, to the second half of today's Economic Update program. It is with great pleasure that I bring to our microphones and to our cameras James Henry. He is a leading economist, attorney, investigative journalist and activist with a strong focus on on tackling global justice issues like tax justice and the climate crisis. He has worked on the highest levels with ge, IBM, Rockefeller Foundation, Bell Labs, Volvo and so on as both researcher and strategic consultant. His reporting work has appeared in the New York Times, Washington Post, Financial Times and more. He's been featured on TED Talks, BBC, npr, produces documentary films as well. Finally, he's been a Nader raider and is currently a senior fellow at Columbia University's University center for Sustainable Development. And he's also been an attorney at the New York Bar since 1979. So, James, or Jim, as he allowed me to call him, welcome to the program.