DAVID GREENE, HOST:
Democratic presidential candidate Bernie Sanders has promised to get tough on Wall Street if he is elected president. He would do that in part by imposing a small fee, or tax, on some financial institutions. He'd use the revenue to pare down student debt and provide free tuition at public colleges. One big question, though, is how much money we're actually talking about. Here's NPR's Jim Zarroli.
JIM ZARROLI, BYLINE: Sanders calls his idea a speculation tax, but it would apply to all trades involving stocks, bonds and derivatives. And he says it would be a way for taxpayers to get something back for the money they lent big banks during the financial crisis.
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BERNIE SANDERS: The American people bailed out Wall Street. Now it's Wall Street's time to help the middle class.
ZARROLI: Sanders spoke after the New Hampshire primary. The idea of a financial transactions tax is not new. Versions of it were proposed by John Maynard Keynes and Nobel prize-winning economist James Tobin. The U.S. actually had such a tax until 1966. And today, many countries, including Great Britain, impose one. Sanders says reinstating such a tax in the U.S. would accomplish two goals. First, it would cut down on unnecessary trading that can destabilize the markets. Len Burman of the Urban-Brookings Tax Policy Center says an argument can be made that a lot of computer-generated, high-speed trading serves no economic purpose.
LEN BURMAN: These high-frequency traders make enormous amounts of money, billions and billions of dollars, and do actually nothing of any social value for the economy. There's kind of the modern-day equivalent of skimming pennies out of the till.
ZARROLI: A tax on high-frequency trading has been proposed by Hillary Clinton. But unlike Sanders' plan, it wouldn't apply to other kinds of transactions. How much revenue would be raised by these taxes is unclear. Robert Pollin of the University of Massachusetts at Amherst says the speculation tax proposed by Sanders would cut trading by a lot. But even so a lot of money would come in.
ROBERT POLLIN: I would estimate that given the tax rates in the Sanders' bill, it would be in the range of $340 billion a year in revenue.
ZARROLI: The Tax Policy Center, on the other hand, estimates that the revenue would be a small fraction of that. The estimates vary in part because no one knows for sure how Wall Street would respond. John Cochrane of the Hoover Institution says that if a transaction tax is imposed, investors will do what they can to avoid it. They can go to overseas markets to trade, for instance.
JOHN COCHRANE: Many things are traded internationally. So you want to buy and sell a German bond, well, you can do that in the U.S. You can do it in London. You can do it in France.
ZARROLI: In fact, France, Germany and the rest of the EU are about to impose a tax of their own. But, Cochrane says the point is that a lot of people would find ways to get around the tax.
COCHRANE: I mean, the cleverness of our financial engineers shouldn't be underestimated.
ZARROLI: There's another argument against the tax. Although it would be imposed on big Wall Street firms, Len Burman says some of the pain would probably end up getting passed on to small investors.
BURMAN: Well, there's a lot of trading that's done for people's retirement accounts, and that would be affected by this money that's in your life insurance or other insurance plans that's invested in Wall Street that would be affected by the tax.
ZARROLI: The Sanders campaign says if Wall Street firms end up passing on the tax, there would be tax credits to offset the cost for low- and moderate-income individuals. It also says the tax would benefit pension funds by cutting back on unnecessary trades that drive up pension expenses. In the meantime, it would raise a lot of revenue for education, even if it's not clear exactly how much. Jim Zarroli, NPR News, New York.
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GREENE: And later today on All Things Considered, we'll look at the generation gap among women in their support of Hillary Clinton.
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