Akron Beacon Journal: Revenue options


First Posted: 8/6/2011

President Barack Obama has been pitching the debt-ceiling deal as a vehicle for achieving balance in the ultimate approach to fiscal discipline. The White House reasons that a bipartisan congressional panel will opt for a package that includes increased revenues rather than swallow mandatory reductions in Medicare and defense spending.Perhaps that will be the case. The argument for a collection of spending reductions and revenue increases, preferably an even balance, makes sense, the sacrifice shared more widely. The president rightly has called for a modest increase in the top income tax rate for the wealthiest households, returning to the level of the 1990s.Yet there are other options for raising additional revenue, beyond even the closing of tax breaks to improve the performance of the tax code. A well-designed carbon tax would have the benefit of raising new money and serving two important policy goals: diminishing carbon emissions and spurring clean energy sources, both crucial to addressing climate change.If that proves politically unpalatable, the president and lawmakers would do well to examine applying a small tax to large transactions in stocks and derivatives on Wall Street. One proposal, long on the shelf, would add a tiny 0.25 percent to all transactions in stock above $100,000. Another would be a 0.02 percent levy on deals involving derivatives, including credit default swaps.One study estimates such a transaction tax could generate as much as $150 billion a year. Chances are, Wall Street, trading in huge sums, barely would notice. In other words, ways exist for raising new revenue while doing little, if any, harm to the economy. The question is: Will the ideologues on Capitol Hill allow the discussion?