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A few well-written words can convey a wealth of information, particularly when there is no lag time between when they are written and when they are read. The IPS blog gives you an opportunity to hear directly from IPS scholars and staff on ideas large and small and for us to hear back from you.

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Inside-outside Strategy on Wall Street Tax

April 24, 2013 ·

Cross-Posted with The Huffington Post

The International Monetary Fund is accustomed to rallies outside their Washington, D.C., headquarters during their annual meetings. What was different this past weekend was that the activists on the outside and several high-profile government and financial industry speakers on the inside were calling for the same thing: a financial transaction tax.

Outside, around a thousand activists called on world leaders to adopt a small tax on trades of stocks, bonds, and derivatives that could raise massive revenue for jobs, climate, global health, and other public investments.

Inside, in a somber basement auditorium, the IMF hosted a debate on the same topic. The uniform on the outside was a green Robin Hood hat. On the inside, it was a charcoal gray suit. In both spaces, however, there was the sense that the financial transaction tax is gaining momentum and credibility.

net_efekt/FlickrThe rally, sponsored by the Robin Hood Tax campaign, was not the largest to date, but it appeared to be the most diverse, with strong representation from labor, environmental, and global health groups, including National Nurses United, National Peoples Action, Friends of the Earth, Amalgamated Transit Union, Jobs with Justice, and Health GAP.

Inside the IMF, European Commission official Manfred Bergmann reported on the strong progress on his side of the Atlantic, where 11 EU governments are negotiating the final details of a coordinated financial transaction tax. The proposal on the table would tax stock and bond trades at 0.1 percent and derivatives trades at 0.01 percent. Expected revenues: as much as $45 billion per year. If the United States adopted a similar tax, it would raise an estimated $750 million to $1 billion over 10 years, Bergmann said.

Of course the IMF event was not without opposition voices. The strongest was Luc Frieden, the finance minister of Luxembourg, where a light regulatory and tax regime has boosted the size of the banking sector relative to GDP to a level similar to that of Cyprus. Frieden is particularly upset about the potential cross-border effects of the proposed EU tax.

Residents of non-participating countries will have to pay the tax if they trade with financial institutions in one of the 11 participating countries or if they trade financial instruments issued in one of those countries. The UK government has just launched a legal attack on the plan over this extra-territorial issue, a move Frieden applauded.

Avinash Persaud, a former senior executive of JPMorgan, UBS, and State Street banks, noted the irony of the UK's complaint. Britain's own Stamp Duty, introduced hundreds of years ago, is also extra-territorial. Trades of shares in British firms are taxed at 0.5 percent -- no matter who's doing the trading. An estimated 40 percent of the revenue comes from non-UK residents.

In a recent congressional hearing, U.S. Treasury Secretary Jack Lew also raised concerns about the extra-territorial impacts of the EU proposal. He failed to mention that U.S. investors have been subjected to the UK Stamp Duty and other countries' transaction taxes for some time now -- without the sky falling.

Nor did Lew acknowledge the many ways in which U.S. laws impose costs on non-U.S. entities. Take, for example, the 2010 Foreign Account Tax Compliance Act (FATCA), which requires foreign financial institutions to report information about financial accounts held by U.S. taxpayers to the IRS. Foreign banks have also complained about the extra-territorial implications of the Volcker Rule, the provision of the Dodd-Frank financial reform legislation which seeks to prevent deposit-taking banks from making bets with their own capital.

At the IMF, Persaud also scoffed at the Luxembourger's position that any transaction tax should be global: "Samuel Johnson said 'patriotism is the last refuge of scoundrels.' In this case, internationalism is the last refuge of scoundrels."

Indeed, many countries are already raising significant revenue from national financial transaction taxes. In addition to the UK, Persaud listed South Korea, Taiwan, South Africa, Switzerland, and Brazil among the countries that already have some form of the tax. He estimated their combined revenues at around $23 billion per year. Beyond the revenue benefits, Persaud argued that the current lack of taxation on trading activities creates "incentives to build edifices of value that are actually mirages" and can cause systemic risk.

The IMF event was the latest example of the Fund playing a constructive role in the debate. It didn't start out that way. In September 2009, the G20 assigned the IMF to prepare a report on "how the financial sector could make a fair and substantial contribution toward paying for any burdens associated with government interventions to repair the banking system." Initially, then-IMF Managing Director Dominique Strauss-Kahn said financial transaction taxes weren't even worth studying. In his view, such taxes were a "simplistic idea" that wouldn't work.

But in response to international public pressure, the Fund agreed not only to include the issue in their analysis but also to engage in civil society consultations. In the IMF report for the G20 leaders, they made clear their preference for other forms of financial sector taxation, particularly a "financial activities tax" on bank profits and compensation. Nevertheless, they also acknowledged that transaction taxes were administratively feasible and could raise significant revenue. And in a follow-up technical paper, they acknowledged that most G-20 countries, including Brazil, India, and South Africa, have already implemented some form of FTT. In October 2012, current IMF Managing Director Christine Lagarde said that the EU progress on a coordinated financial transaction tax was "clearly a good move."

At the debate, the Director of the IMF's Fiscal Affairs Department, Carlo Cottarelli, stressed that the IMF would still be pushing their "beloved" financial activities tax. But he admitted that since the IMF's 2010 report to the G20, there hasn't been much progress on that. "The momentum behind FTT was so strong, it was hard to turn in another direction. Sometimes life just isn't fair," he said with a laugh.

Follow Sarah Anderson on Twitter: www.twitter.com/Anderson_IPS

This Week in OtherWords: April 24, 2013

April 24, 2013 ·

This week in OtherWords, Jill Richardson looks at the Texas factory explosion in the context of whether we should be using so much nitrogen fertilizer in the first place and William A. Collins and I review recent progress toward ending the prohibition on pot.

Here's a clickable summary of our latest commentaries and a link to our new cartoon. If you haven't already subscribed to our weekly newsletter, please do.

  1. A Reasonable Food Fight / Ryan Alexander
    President Obama's efforts to overhaul the nation's global food aid system are sensible.
  2. Our Biggest Terrorist Threat / Marc Morial
    Senate inaction on guns was inexcusable in the wake of the Boston Marathon bombing.
  3. Shameless Bipartisanship / Richard Long
    Two once-prominent politicians who disgraced themselves in sex scandals are angling for a return to public life.
  4. Saber-Rattling on the Korean Peninsula / Justin Bresolin
    Aggressive posturing only increases the likelihood of a dangerous miscalculation.
  5. Stopping the Senseless Carnage / Donald Kaul
    Could we just cut back on warfare a little?
  6. Tracking CEO Pay / Sam Pizzigati
    The most important executive compensation indicator is the gap between what CEOs and their workers are paid.
  7. The Price of Our Fertilizer Addiction / Jill Richardson
    Compared to the lifetime of grieving ahead for the people of West, Texas, a few years of reduced crop yields is a small price to pay for converting from "conventional" to organic farming.
  8. Making Poverty a Crime / Jim Hightower
    Jailing indigents for debts costs the courts way more than the fines they owe and violates the Constitution.
  9. The Pot Prohibition Runs Its Course / Emily Schwartz Greco and William A. Collins
    Now that most Americans support the legalization of marijuana, some Republicans back the right of states to stop banning it.
  10. Holy Smokes / Khalil Bendib

    Holy Smokes, an OtherWords cartoon by Khalil Bendib 
An Inside View on the Tricky World of Wall Street-Driven Climate Markets

April 18, 2013 ·

The World Bank likes to talk a good game on climate change. But when it comes to taking action, its approach can be “too narrowly focused, small scale and uncoordinated,” admits Bank President Jim Yong Kim. Worse still, it often backs entirely the wrong strategies, like carbon markets, while continuing to invest billions every year in new fossil fuel infrastructure.

Climate Finance Markets Site - www.climatefinance.org

VIEW NEW WEBSITE HERE: www.climatemarkets.org.

Since taking the helm, Jim Kim has made repeated promises that addressing climate change – and the devastating impacts it has on development – will be at the center of the Bank’s agenda. Key to this is a new Presidential Task Force on Climate Change, which will examine fossil fuel subsidies, carbon markets, “climate smart” agriculture, and partnerships to build cleaner cities. At the same time, the Bank’s low-income focused International Development Association (IDA), and its private sector arm, the International Finance Corporation (IFC), have both identified climate financing as a priority area.

The World Bank-IMF spring meetings convening in Washington DC provide an opportunity for the Bank to flesh out a new approach. The early signs are not promising, though. Carbon markets remain a central pole of the bank’s strategy, with $110 million pledged to a “Partnership for Market Readiness” that is encouraging the creation of new markets modeled on a European scheme that has already virtually collapsed.

There are indications, too, that much of the Bank’s “bold” new thinking is based on reaching out to the financial sector, using some of the same Wall Street tricks that proved so devastating for the United States and global economy in the 2008 crash. The Bank isn’t alone in this approach: the Green Climate Fund, and many of the other international financial institutions, are looking to encourage (“leverage”) private sector finance to plug the massive holes in climate financing left by industrialized countries failing to meet their obligations.

Dusting down the same old financial approaches isn’t going to work. In climate circles, it's already possible to hear the familiar refrain that rich-country austerity means that “There Is No Alternative” to courting the private sector. To which we’d respond: the United States is not broke, and neither are the other industrialized (“Annex I”) countries that should be making far larger public financial contributions and developing ambitious domestic plans to curb the greenhouse gas emissions that cause climate change. On the financial side, these could be supplemented by a range of genuinely “innovative” approaches, including financial transaction taxes, or a "Robin Hood tax."

We’ve set up a new website on Climate Finance and Markets (climatemarkets.org) to explore these new approaches, and to monitor how the World Bank, the Green Climate Fund and others are courting the financial sector.

The site, put together by IPS with the support of the Heinrich Böll Foundation North America, offers a range of materials that could help climate activists and advocates understand the new financial tools that are emerging, the role of key private sector actors (from banks to private equity funds), attempts to “leverage” private investment, and alternatives to this Wall Street-driven approach. Bank staff, public officials and journalists attending the World Bank-IMF spring meetings could even learn a thing or too as well.

Climate Finance Markets Site - www.climatefinance.org

See climatemarkets.org or follow us on Twitter @ClimateMarkets1

This Week in OtherWords: April 17, 2013

April 17, 2013 ·

This week in OtherWords, Donald Kaul skewers the "progress" Congress is making on gun control, Chris Schillig weighs in on the Boston Marathon attack from a runner's perspective, and Jim Hightower marvels at the Army's green ambitions.

Here's a clickable summary of our latest commentaries and a link to our new cartoon. If you haven't already subscribed to our weekly newsletter, please do.

  1. Under-Regulating the Regulators / Michael Smallberg
    The career moves of the latest SEC chiefs underscore the agency's revolving door problem.
  2. Let’s Lace Up and Keep Running / Chris Schillig
    We can't close down the world and huddle in our houses after the Boston Marathon attack.
  3. Cutting Your Benefits Isn’t the ‘Middle’ Way / Peter Hart
    The rest of us are being left out of the "entitlement reform" story.
  4. ExxonMobil’s Mayflower Mess / Michael Brune
    Tar sands crude is both more toxic and much harder to clean than ordinary oil.
  5. No Progress on Gun Control to Report / Donald Kaul
    Gun lobbies have our legislature of cowardly lions in their teeth.
  6. The Art of Inequality / Sam Pizzigati
    Monumental gifts to museums are coinciding with the erosion of arts programs at the nation's public schools.
  7. How to Send Less Trash to the Landfill / Jill Richardson
    Make a down payment on your own soil's fertility by composting.
  8. The Army Goes Off the Grid / Jim Hightower
    Fort Bliss, a base near El Paso, is a hotbed of solar power and other green energy initiatives.
  9. Where the Money Is / William A. Collins
    America's banks have always been shady.
  10. Sacrificing Social Security / Khalil Bendib  cartoon 

Sacrificing Social Security, an OtherWords cartoon by Khalil Bendib

How About a Tax System for the 99 Percent?

April 17, 2013 ·

Cross-Posted with Yes! Magazine

Paying taxes, as tens of millions of us in the United States do every April, evokes many emotions—from gratitude for government programs that feed the hungry to disgust over paying for fossil fuel subsidies and unjust wars. But among a growing number of people, it is also evoking anger over an unequal tax system that favors the 1 percent over the 99 percent.  More and more of us are saying that corporations, Wall Street, and the wealthy should pay their fair share.

Robin Hood Tax USA/FlickrThe good news is that rising numbers of organizations and people are involved in struggles for a more just tax system.  Below we share the contours of three such campaigns, all of them winnable before the next U.S. president is elected.

Corporations: Daily newspaper headlines remind us that corporations are making record profits while their workers’ paychecks have been frozen for decades.  These same corporations complain that the corporate tax rate, pegged at a mere 35 percent, is one of the highest in the world.  And, corporations are lobbying furiously to cut that rate.

Read the rest of this post on Yes! Magazine's website

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