THE BLOG

Robin Hood: Taxing Men in Suits

02/22/2013 02:18 pm ET | Updated Apr 24, 2013

A heroic outlaw prowls the forest with his band of Merry Men, looking for caravans of nobility to loot and plunder for the poor.

While a few individuals controlled the majority of wealth, the poorest people in society slaved away in the harshest of conditions. Someone needed to stand up for the common good and ensure that everyone had a right to live in comfort, free of financial burden. And that person was...Kevin Costner? Wait no, it was Robin Hood.

Whatever you think of Robin Hood, it's hard to argue his legendary actions were unjustified.

The story harkens back to a simpler time; a time before Collateralized Debt Obligations and whatever other weird financial products bankers dreamed up wrecked the global economy; a time when "socialism" meant a band of thieves roaming around with arrows and swords, taking from the rich and giving to the poor.

But alas, we no longer live in the 15th century and in a modern world, "Robin Hood" isn't a man, but a tax proposal known as the Financial Transaction Tax (FTT). Yes, we live in complicated (read: boring) times, my friend.

A FTT is a small tax levied against the purchase/sale or transfer of the four main classes of financial assets: bonds, equities, foreign exchange and their derivatives.

But what does this have to do with a bunch of men running around the forest? Quite a lot actually, albeit with an unfortunate lack of bankers and executives wearing green tights around Wall Street.

FTTs are inherently progressive in that the principle buyers/sellers of financial assets - big banks, hedge funds and other financial institutions - shoulder the brunt of the tax. Ordinary people, for the most part, do not trade assets at a frequency high enough to feel any significant burden from a FTT. This means that the wealthiest institutions and individuals in society would feel the greatest impact.

Want to talk about deficit reduction? Given the frequency of financial transactions in the United States, a well-implemented FTT could raise almost $50 billion a year

This is money that could be spent on investments in public education, infrastructure and research and development programs. Money that will create jobs and reduce inequality in America that will send ripples around the world.

Now, Robin Hood was only focused on helping the poor, which is why you may read some literature defining clear distinctions between a "Robin Hood Tax" and a FTT. But let's place Robin Hood in the 21st century, maybe without a weapon (gun control is kind of a big deal right now) and with skinny jeans instead of tights (he'd fit in well with the younger crowd).

Federal programs that invest in average Americans will inevitably help the poor in the form of greater access to education, reduced inequality, access to high-paying jobs, etc. I think that's something even a hipster Robin Hood would get behind.

Is a strong FTT politically feasible in the United States, or will it only be known as a legend, a brief policy passing through the annals of history destined for the dusty, untouched shelves of academics? Well, the US has previously levied a FTT on stocks and several bills have been recently introduced in Congress that supports a FTT.

Of course you can be sure that bankers and executives will defend their fiat money like old English nobles defending their gold coins. But the political headwinds point in a different direction, and hopefully soon we'll finally see the legendary Robin Hood roaming the dense urban jungles of American