The financial crisis has put stress on many government programs, from education to health care to efforts to fight poverty and climate change. One of the leading responses has been to call for further cuts in programs that are already suffering.
Earlier this year, British activists tried to reverse this trend, launching a campaign that would levy taxes on financial transactions to help offset cuts. Supporters, such as Oxfam, unions, and some financiers, have dubbed it the Robin Hood tax—taking a cut from wealthy banks and giving it to the impoverished. The “tax” is a tiny amount on most transactions, averaging around a twentieth of a percent, starting at 5¢ for every $1,000 traded.
Transaction taxes have the support of major European politicians such as Angela Merkel, Nicolas Sarkozy, and Gordon Brown. In the United States, financial heavyweights George Soros and Warren Buffett have backed the idea, which is based loosely on the tax put forward by the American economist James Tobin in the 1970s, levied on foreign-exchange transactions. Despite the American roots of the tax, the United States has been the largest obstacle at the UN to a levy on financial institutions because of a long-standing aversion to an international tax.
Perhaps most importantly for the recent British general election campaign, the Liberal Democrats supported the Robin Hood tax in their manifesto released in April.
Will it work? “A tax structure that does not reward short-term, very speculative gains would be good,” Nobel Prize–winning economist Joseph Stiglitz told the Guardian. “If you were investing for a year or five years or 10 years it would be a small tax, but if you were holding it for just one minute it becomes a very high tax.…The only question is, can it be effectively implemented? Will it be circumvented? There’s a growing consensus it can be implemented, if not perfectly, effectively enough to make a difference.”
The campaign for the Robin Hood tax began in February with an online film written by Richard Curtis, the writer of Four Weddings and a Funeral, and starring Bill Nighy (robinhoodtax.org.uk).