A financial levy similar to that proposed in the Investing in Our Future Act, called the Robin Hood Tax, is gaining support in the United Kingdom.
It’s been called The Robin Hood Tax, the Tobin Tax, and the less sexy Financial Transactions Tax or Currency Transaction Levy. According to Congressman Pete Stark (D-CA13), who introduced a bill on July 20 to create a version of it in the United States, the proper name is the even less thrilling Investing in Our Future Act of 2010 (which is at least better than calling it by its bill number, House Resolution 5783). But what is it, and what does it have to do with climate change?
Whatever the name, the concept is relatively straightforward: deduct a very small percentage (Stark’s bill suggests 0.005 percent, or five-thousandths of one percent) from the transfer of large amounts of money between people and/or companies, especially the exchange of one currency into another. The rationales for this charge are many. While the fee makes the value of a single transfer of money almost unnoticeably less (just 5 pennies off for a tourist converting 1,000 U.S. dollars to Euros), it makes the shuttling of money thousands of times between different bank accounts or currencies much costlier. That kind of back-and-forth trading happens routinely in currency speculations that, according to many commentators, contributed decisively to the recent financial crisis. Most versions of the charge would exempt small amounts of money ($10,000 each year per company or per person in the Stark bill), keeping the burden off vacationers and small-time traders while discouraging risky repetitive maneuvers by banks and hedge funds.
Just how much money could this fee raise, and where would the funds go? Congressman Stark claims that his bill, which applies to U.S. transactions only, would raise $28 billion per year while reducing U.S.-based currency speculation 14 percent. According to more than 350 economists worldwide who endorsed a currency speculation levy earlier this year, the money should go toward tackling global threats such as climate change and infectious diseases in the developing world. Similarly, the Investing in Our Future Act directs 40 percent of the revenue to climate change mitigation and adaptation in developing countries, 40 percent to the Global Fund to Fight AIDS, TB, and Malaria and other health funds, and the remaining 20 percent to expand support for child care for working parents in the United States who can’t otherwise afford it. The United Kingdom-based Robin Hood Tax campaign also proposes to divide its charge’s estimated US$400 billion per year among a host of domestic and international needs. That includes fighting climate change.
That’s good news at a critical time for climate funding. Richer nations are looking for ways to meet the pledge they made at the Copenhagen negotiations of US$100 billion per year for developing country climate financing by 2020. Estimates put the total cost of stopping and adapting to climate change much higher (see page 10 of linked report). With an already decimated Sherwood Forest facing new threats in a hotter climate, the Robin Hood Tax and Investing in Our Future Act may have arrived just in time.