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Chicago needs a financial transaction tax now more than ever

We've got $700 million problems but this tax could solve some.



It's been more than three months since I last wrote about our need for a financial transaction tax on the city's exchanges. But in that short time Mayor Emanuel's given us roughly 700 million new reasons for supporting it.

For those of you following at home, that's approximately how much the mayor has asked us to pay in new property taxes—with $543 million going to the city, $80 million going to CPS, $45 million going for school construction, and at least $40 million going to the tax increment financing program—to pay the debts and obligations he's been putting off for the last four years.

Look on the bright side. We now have a rough idea of how much the mayor's willing to tax us before he even explores the possibility of tapping into the LaSalle Street mother lode.

It's time to get real. With taxes going through the roof, we need to find new sources of revenue other than the same old regressive fines, fees, and property taxes. It's crazy not to at least explore the pros and cons of a tax that could bring in top dollars from people who can most afford to pay.

My inspiration in these matters is Joan Kufrin, a retired freelance writer from Chicago, who had a revelation earlier this year about the potential benefits of the so-called LaSalle Street tax as she watched Mayor Emanuel inch closer to her pocketbook. (Metaphorically speaking.)

In June, Kufrin sent a letter addressed to the state's four chief political leaders and to the editorial boards of the downtown dailies. Noting that state rep Mary Flowers had proposed a financial transaction tax in 2013, Kufrin wrote, "Had it been enacted into law, in 2014 this penny tax on financial transactions would have raised $116.1 billion for the state with $11.6 billion coming to Chicago."

Even Mayors Emanuel and Daley couldn't waste $11.6 billion—though I'm sure they'd be willing to give it the old college try.

After I wrote about Joan's suggestions, my pals in the business world blasted me with criticism on three fronts:

One young man tried to appeal to my heartstrings. He contended that the margin of profit for many traders is so small and their existence so fragile that any tax—even a teensy one—would force untold numbers of traders out of business.

This is a tough argument to sell. For one thing, traders are supposed to be the masters of the universe, the last true believers in the free-market. By begging off this tax they'd in effect be forcing the rest of us to prop up their industry by allowing it to continue operating tax free.

That's not very Milton Friedman-like of them.

Secondly, I can't feel a whole lot of sympathy for traders when I note that the richest man in the state—hedge fund manager Kenneth Griffin—just bought a condo complex in New York City for about $200 million.

Apparently the two units he recently purchased for $30 million here in Chicago aren't big enough.

The second argument is that it's nearly impossible to collect a financial transaction tax since the traders—wily creatures that they are—will just move in droves to some boat off the Cayman Islands to avoid paying it.

In other words, we won't raise any money with it anyway, so why waste our time trying to implement it?

Well, fellas, you can't really have it both ways with these arguments. It can't be an onerous tax if it's so easy to avoid. I suggest all you folks get together for lunch somewhere and figure out which excuse you want to use.

A third explanation was offered by an old friend who told me that a financial transaction tax would be a "job killer," striking hardest at barbers, waiters, and other ordinary Chicagoans.

"These financial guys are in business to make money—they're not charities. If you try to impose this tax they'll just move out of town. We won't just lose jobs at the exchange but the businesses that service the exchange—like restaurants and barber shops."

That's generally the excuse Mayor Emanuel gives when forced to address the issue. As though LaSalle Street would become a ghost town if this tax were imposed.

The sad fact is that this excuse hasn't been relevant for years. The big exchanges—most notably the CME Group—are cutting their payroll as they move toward electronic trading.

Fewer clerks and runners and secretaries means fewer people for the barbers and bartenders and waiters and waitresses of LaSalle Street.

With electronic trading wiping out many of the support jobs, the prime benefit of having these exchanges based in Chicago is to tax them, as heartless and politically incorrect as that may sound.

Look, I don't like paying taxes either. Don't get me started on my property tax bill. Man, that sucker's gone up 206 percent in the last 15 years—even as Mayors Emanuel and Daley swore up and down they were holding the line on property tax hikes.

But let's be honest, people, there's no compelling reason not to impose a financial transaction tax other than that the people who run this industry don't want to pay it. And that's not very compelling at all.

Alas, I'm enough of a realist to understand that the transaction tax won't be happening anytime soon, no matter how much sense it makes.

On one side, you have the wealthiest, most powerful business leaders in the city, backed by Mayor Emanuel, Governor Rauner, house speaker Michael Madigan, and senate president John Cullerton.

On the other side you have people like me, Joan, and a bunch of supersmart wonks, like economist Ron Baiman and Bill Barclay from the Chicago Political Economy Group.

There is something else to consider though. One industry booster told me he's a little concerned that the LaSalle Street tax might get some traction. Not because of anything that Joan or I might do—he scoffs at us.

No, he's worried that downtown commercial property owners may embrace the issue as they rally against the mayor's pending property tax hike.

Wow! Talk about an odd coalition—me and the likes of Sam Zell versus Mayor Rahm, Governor Bruce, and Ken Griffin.

Now that would be more of a fair fight.  v

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