It’s time to impose a COVID-19 equity surcharge on Wall Street

Congress should impose a small COVID-19 equity surcharge on all trades in stocks, bonds and derivatives. The funds raised from this surcharge should be invested in counties in which the COVID death rate is at least twice the national average. Recipient communities would invest the funds in the infrastructure needed to deliver vaccinations; in materials and personnel for testing and contact tracing; in treatment for COVID patients, including those with lasting effects; and in treatments for the underlying health conditions, such as hypertension.

Once a recipient county’s death rate falls to the point that it deviates less than half a percent from the national norm, the funds would flow to other jurisdictions, until all have met this goal. (Eliminating the difference below half a percent might be unduly difficult.) Once all counties are normalized, the surcharge will no longer be collected.

The idea to impose a levy on market trades has been supported by John Maynard Keynes, James Tobin (a Nobel laureate in economics), Joseph Stiglitz, and Lawrence H. Summers — and most of the Democratic candidates in the last election.

My version of the idea builds on a bill introduced on Jan. 15 by Rep. Peter DeFazio (D-Ore.), who was joined by Majority Whip James Clyburn (D-S.C.) and a dozen other original co-sponsors in re-introducing the Wall Street Tax Act, a bill to implement a 0.1 percent tax on stock, bond and derivative trades.

The main difference between my suggested surcharge and the DeFazio bill is that the surcharge investments are targeted and the surcharge itself is temporary. It also avoids references to “taxes.” We have learned that labels make a difference. Republicans gained a lot of support in their opposition to the estate tax once they began calling it a “death tax.” And Democrats benefited once they stopped referring to expenditures on various programs and instead spoke of investments in the same programs.   

Democrats are often charged with being the tax-and-spend party. When the new White House press secretary was asked about raising revenues to cover the large stimulus package that the administration is promoting, she sidestepped the issue. But a surcharge, targeted for COVID relief, should be much more palatable. “It is commonsense to have the financial industry chip in an extra dime, like how we all pay sales taxes on our purchases,” Susan Harley, managing director of Public Citizen’s Congress Watch, recently argued in The Hill.

Usually, raising revenues during an economic downturn is frowned upon by economists, for good reason. However, if it will somewhat slow down the frenzy of speculation on Wall Street, this surely is a commendable effect.

Finally, a great merit of the surcharge – which, when accumulated, will raise billions – is that it will serve to transfer some wealth from the sector of society that became richer and richer during the pandemic, as the stock market soared, to those who have suffered the most. Those who own no stocks are much more likely to be unemployed, behind on their rent and food insecure, as well as to be or have been sick with COVID. Even though the tax is small – just ten cents for every $100 of trades – it adds up to nearly $777 billion over 10 years.

Other nations impose such levies. For example, Hong Kong has taxed financial trades for years, and the United Kingdom has similarly taxed stock transactions for hundreds of years. The stamp tax, which was put in place in Britain in 1694, is set at 0.5 percent, a level five times higher than the rate proposed here. Furthermore, this type of tax has existed in the U.S. for decades. From 1914 to 1966, the U.S. levied a 0.02 to 0.06 percent tax on all sales or transfers of stock and securities sales.

Critics are likely to argue that a surcharge that raises large amounts of revenue while causing little pain is unlikely to be lifted and may well be raised to higher levels. To those of us concerned about the sharp rise in inequality and the stock market frenzy, these seem like good ideas.

Amitai Etzioni is a professor of international affairs at The George Washington University. He is the author of “The Moral Dimension: Toward a New Economics” and “Reclaiming Patriotism.”