“Malawi’s Constitutional Court has taken a monumental step towards protecting press freedom and affirmed that criticism and dissent are essential to democracy by ruling criminal defamation to be unconstitutional,” said Muthoki Mumo, CPJ’s Africa program coordinator, in Nairobi. “Authorities should immediately comply with the judgment, and other laws that may unduly restrict the work of journalists must also be reformed.” 

In a unanimous decision, three constitutional court justices ruled that the defamation law was a “disproportionate and unjustifiable limitation on constitutional freedom,” according to a summary of the judgment reviewed by CPJ.

The ruling follows social media influencer and activist Joshua Chisa Mbele’s 2022 legal challenge of criminal defamation charges for his remarks about a military official.

In its decision, the court ordered that no further prosecutions on criminal defamation charges be brought under the law.

The Malawian chapter of the Media Institute of Southern Africa and other civil society organizations urged the government not to appeal the ruling and to reform other laws that restrict free expression. Section 60 of Malawi’s penal code criminalizes publishing false news, with penalties of fines or up to two years in jail, and the 2016 Electronic Transactions and Cyber Security Act makes unauthorized transmitting data or information punishable by a fine of 2,000,000 Malawian kwacha (USD $1,153) and a 5-year imprisonment. 

In 2022, Malawi amended its Protected Flag, Emblems, and Names Act of 1967, to decriminalize insults against the president but retained prison time for those convicted of insults to flags or protected emblems.

Malawi Attorney General Thabo Chakaka Nyirenda did not respond to CPJ’s calls or text messages for comment on the court’s decision.

This content originally appeared on Committee to Protect Journalists and was authored by CPJ Staff.

The seizures took place largely at MBC offices in Blantyre, Lilongwe, and Mzuzu following a complaint by MBC’s management about the creation of a “fake” Facebook page bearing the corporation’s name and logo, which the outlet had not approved, according to the Media Institute of Southern Africa (MISA), the journalists, and police search warrants reviewed by CPJ. The complaint accused the 14 journalists of “spamming,” which carries a maximum penalty of two million Malawian kwacha (about US$1,190) and imprisonment for five years under section 91 of Malawi’s Electronic Transactions and Cybersecurity Act.

As of March 8, police returned three laptops and nine phones to the journalists, according to a journalist who spoke to CPJ on the condition of anonymity out of fear of reprisal. The journalist, whose phone has been returned, is concerned that the device has been compromised while in police custody and will no longer use it.

Another journalist, who also spoke to CPJ on the condition of anonymity out of fear of reprisal, said some MBC colleagues received email notifications about attempts to log into their Instagram and X accounts while their devices were in police custody.

Malawi police spokesperson Peter Kalaya told CPJ in a late February 2024 phone interview that the police investigation was being conducted in response to a legitimate complaint, and police had obtained a warrant before seizing and searching the devices. 

“The investigation is not targeting journalists, it is targeting people who we suspect to be responsible” for the Facebook page, Kalaya said, but he declined to explain how the police had determined which individuals were suspects. 

“We have a forensics laboratory and sometimes we use other institutions’ forensic laboratories,” Kalaya told CPJ, but declined to give specifics about the technologies used to search the journalists’ devices. “Our search in the gadgets is going to be restricted to those apps that we believe or that we suspect were used in the commission of the crime,” Kalaya told CPJ, adding that the journalists whose devices had been seized should trust the professionalism of the investigating officers. “Why should a police officer go to contacts, to [the] photo gallery when what he is looking for is not there, or if he does not suspect it will be there?” he said.

In January 2024, the local Platform for Investigative Journalism (PIJ-Malawi) reported that Malawian authorities had obtained the Universal Forensic Extraction Device (UFED), a powerful technology designed to access and extract information from electronic devices and sold by the Israel-based company Cellebrite. The Malawi police sought to further expand its investigative capacity with similar tools, according to the report. In response to CPJ’s questions about which tools, including those sold by Cellebrite, police used to search the devices of MBC journalists, Kalaya declined to give specifics.

CPJ has previously documented the use of Cellebrite’s UFED by police in Botswana to search journalists’ phones and has raised the issue of privacy concerns when law enforcement seizes devices and has access to such technology. 

MBC director general George Kasakula declined to comment until the police investigation into the alleged spamming concludes at an unknown date.

On February 15, five police officers looking for Greyson Chapita, MBC’s suspended controller of news and programs, arrived at his daughter’s home. The officers told family members there to call Chapita and tell him that his daughter was sick to lure him there, the journalist told CPJ, adding that his family obliged, and he arrived shortly after. Once Chapita arrived, police officers told him that he was a suspect in a murder and requested to search his phone and laptop, but he initially refused.

Chapita told the officers that he would not comply until he verified that they were police officers, and he went with them to the local police station to confirm their identities. Once confirmed by a senior officer, Chapita returned with them to his home, where the officers showed him the same warrant citing MBC management’s complaint, and he opened his laptop and entered his password, he told CPJ. The officers then looked through his Facebook account for 30 minutes without further explanation as Chapita watched.

“[T]hey checked my Facebook account and took screenshots. They made me sign a document showing that they searched my laptop and did not find anything, so they didn’t take it. They couldn’t see my phone because it is not a smartphone,” the journalist added.

When asked about the police officers’ tactics used to summon Chapita and search his computer, Kalaya told CPJ that he could not comment on the specifics of the incident, but he said the journalist could file a complaint. 

“What I can assure you is that our investigators are very professional and whatever they are doing is very professional,” Kalaya said.

This content originally appeared on Committee to Protect Journalists and was authored by Committee to Protect Journalists.

Police opened an investigation into the journalists, who have since been released, under Section 47 of the Electronic Transactions Act, 2008, those sources said. The law criminalizes the electronic publication of content deemed illegal under existing laws or “contrary to public morality or decent behavior” with a penalty of up to five years in prison and a fine of 100,000 rupees (US $754). CPJ has repeatedly documented the use of the Electronic Transactions Act to detain and investigate journalists for their work.

Kamal Thapa, superintendent of the Kanchanpur police, told CPJ that the case registered against the journalists was in relation to their social media posts, not their news coverage. On February 5, the Kanchanpur police said in a statement that those who “write such misleading news/status” would be punished under the law.

Binod Bhatta, the journalists’ lawyer, told CPJ that his clients’ social media posts and news coverage should be considered as interrelated because they reported on the same topic in the public interest.

On February 5, Bhatt published an interview on his Facebook page with a police officer who said that he resigned from his job after he was beaten by a female inspector, whom he named. Bhatt also commented on the allegations on his Facebook page.

On February 5, Kunwar’s news website Nigarani Khabar reported the same allegations against the female officer, while a second article made four allegations of misconduct by the same policewoman, including her involvement in detaining Kunwar in 2023 while the journalist was reporting on a clash between police and locals. Kunwar also commented on the allegations on her Facebook page.

Bhatt and Kunwar were released at around 10 p.m. on February 14 and 1 a.m. on February 15 respectively, on personal guarantee, which requires them to remain present in the area while the investigation is carried out, according to Media Action Nepal, Bhatta, and a person familiar with the case who spoke to CPJ on condition of anonymity, citing fear of reprisal.

While in police custody, the officer asked the journalists to apologize by touching her feet, a sign of respect in South Asian culture, but Kunwar refused, which delayed her release, those sources said.

As of February 20, the journalists’ phones, which were seized during their arrest, remained in police custody, according to Bhatta and the person familiar with the case.

This content originally appeared on Committee to Protect Journalists and was authored by Committee to Protect Journalists.

ProPublica is a nonprofit newsroom that investigates abuses of power. Sign up for Dispatches, a newsletter that spotlights wrongdoing around the country, to receive our stories in your inbox every week.

A U.S. Senate subcommittee on Tuesday heard warnings about alternative home financing deals that leave unwitting buyers financially devastated and unscrupulous sellers free to resell the properties.

“This gets to a point that I think all of you have made in one way or another, which is that these contracts are designed to fail, because that’s how the seller makes more money,” said U.S. Sen. Tina Smith, D-Minn., at a hearing of the Subcommittee on Housing, Transportation and Community Development, which she chairs. “The incentives are perverse.”

In an interview, Smith said an investigation by ProPublica and Sahan Journal about contract for deed practices in Minnesota prompted the hearing. The investigation examined the impact on Somali Muslim families in the Twin Cities area who said they signed deals they didn’t understand for homes with inflated prices and large down payments.

The subcommittee members discussed whether federal or state laws ought to apply to these deals and how consumers can be better protected.

“Are there appropriate protections states can make to make sure that the market works without a bunch of folks who should have a special place in hell?” asked Montana Sen. Jon Tester, a Democrat.

The hearing concerned several alternative home purchase methods, including contracts for deed, which are sometimes known as land contracts, as well as rent-to-own housing programs. Witnesses testified that low-income buyers, often people from communities of color who have been denied traditional mortgages or, because of their faith, choose not to use them, instead opt for these products.

Sarah Mancini, co-director of advocacy at the National Consumer Law Center, told senators these financial products are a “costly and harmful detour from homeownership.”

“NCLC estimates that the failure rate for these transactions is well above 50%,” Mancini said. “And this is a conservative estimate.”

The Sahan Journal-ProPublica investigation, published last year, discovered a rising market around the Twin Cities area for contracts for deed, which involve financing directly between a seller and buyer. Many members of the large East African Muslim community in Minnesota avoid paying or profiting from interest due to the principles of their faith, and investors have been offering them contracts for deed as a way to buy a house without paying traditional interest.

The investigation found that Somali Muslim buyers often did not understand that the contracts lack many of the consumer protections of a mortgage and contain large balloon payments. Until the final payment is made, which can be hundreds of thousands of dollars, the seller holds the ownership of the property, and a missed payment can result in an eviction in as few as 60 days.

Contract sellers say that they provide a needed alternate path to homeownership and that when used properly, they are a legitimate financial instrument. But Beth Goodell, supervising attorney at Mid-Minnesota Legal Aid, told senators that because state law offers so few protections, buyers are at risk of losing everything.

“My clients tend to have trusted the sellers,” Goodell said. “One of my clients said to me, ‘Why would this seller sell me a house that he knew I couldn’t afford?’ And the answer, ‘The seller would make a lot of money if you fail,’ was beyond her understanding.”

Mancini testified that she believes that contract for deed agreements fall under federal laws like the Truth in Lending Act, but that they are “being violated left and right, and no one is enforcing it.” She said that the Consumer Financial Protection Bureau and state attorneys general should be tasked with enforcement.

Last month, CFPB director Rohit Chopra testified in his semiannual report to Congress that he was also aware that contract sellers were “targeting certain immigrant groups” in Minnesota as well as elsewhere.

Smith said that she has spoken to the Minnesota attorney general’s office about possible enforcement actions and is interested in exploring changes in state law to better protect buyers.

“The Twin Cities has the worst racial homeownership gap between white families and Black families of any place in the country,” Smith said. “To see that legacy play out with these exploitative contracts that make it worse and not better is a terrible thing to see.”

This content originally appeared on Articles and Investigations - ProPublica and was authored by by Jessica Lussenhop.

In a 2023 book titled A Tale of Two Economies: A New Financial Operating System for the American Economy, Wall Street veteran Scott Smith shows that we would need to tax everyone at a rate of 40%, without deductions, to balance the budgets of our federal and local governments – an obvious nonstarter. The problem, he argues, is that we are taxing the wrong things – income and physical sales. In fact, we have two economies – the material economy in which goods and services are bought and sold, and the monetary economy involving the trading of financial assets (stocks, bonds, currencies, etc.) – basically “money making money” without producing new goods or services.

Drawing on data from the Bank for International Settlements and the Federal Reserve, Smith shows that the monetary economy is hundreds of times larger than the physical economy. The budget gap could be closed by imposing a tax of a mere 0.1% on financial transactions, while eliminating not just income taxes but every other tax we pay today. For a financial transactions tax (FTT) of 0.25%, we could fund benefits we cannot afford today that would stimulate growth in the real economy, including not just infrastructure and development but free college, a universal basic income, and free healthcare for all. Smith contends we could even pay off the national debt in ten years or less with a 0.25% FTT.

A radical change in the tax structure may seem unlikely any time soon, due to the inertia of Congress and the overweening power of the financial industry. But as economist Michael Hudson and other commentators observe, the U.S. has reached its limits to growth without some sort of debt write down. Federal interest expense as a percent of tax revenues spiked to 32.9% in the first quarter of 2023, and it will spike further as old securities at lower interest rates mature and are replaced with new ones at much higher interest. A financial reset is not only necessary but may be imminent. Promising proposals like Smith’s can lead the way to a much-needed shift from serving “capital” to serving productivity and the broader public interest.

A Look at the Numbers

The material economy is roughly measured by the annual Gross Domestic Product (GDP), which for the U.S. had reached $25.6 trillion by the third quarter of 2022. (Michael Hudson observes that even GDP, as currently measured, is largely composed of non-productive financial services.) GDP is defined by spending, which depends on income. Collectively, Americans earned $21 trillion in 2021. The monetary economy is defined as the total amount of money that changes hands each year. Smith draws his figures from data that the Federal Reserve publishes annually in the Bank for International Settlements’ Red Book. The Red Book is not all-inclusive; it leaves out such payments as commodity trading, various options, crypto currency trades, and exchange-traded funds. But even its partial accounting shows $7.6 quadrillion in payments – more than 350 times our national collective income. Smith includes this chart[i]:

He comments:

Most of these payments have little to do with what we regard as the real economy— the purchase of goods and services and the supply chain. Our GDP represents less than 0.33% of the payments in our economy. Once we see the big picture, the solution is obvious. We should tax payments instead of our income.

Smith calculates that U.S. spending by federal, state and local governments will total around $8.5 trillion in 2023. Dividing $7,625 trillion in payments by $8.5 trillion in government spending comes to a little more than 0.001, or a tenth of a percent (0.1%). Taxing payments at 0.1% could thus eliminate every tax we pay today, including social security (FICA) taxes, sales taxes, property taxes, capital gains taxes, estate taxes, gift taxes, excise taxes and customs taxes. With a 0.25% FTT, “If you have a net worth of $20 million or less, you would come out ahead. And if you make $500 million per year, you will finally be paying your fair share of taxes – $1.25 million!”

Bridging the Wealth Gap

The financial transaction tax is not a new concept. The oldest tax still in existence was a stamp duty at the London Stock Exchange initiated in 1694. The tax was payable by the buyer of shares for the official stamp on the legal document needed to formalize the purchase. Many other countries have imposed FTTs, including the U.S. — some successfully and some not. In January 2021, U.S. Rep. Peter DeFazio reintroduced The Wall Street Tax Act, which was accompanied in March 2021 by a Senate bill introduced by Sen. Brian Schatz. According to a press release on the Schatz bill, the tax “would create a 0.1% tax on each sale of stocks, bonds, and derivatives, which will discourage unproductive trading and redirect investment toward more productive areas of the economy. The new tax would apply to the fair market value of equities and bonds, and the payment flows under derivatives contracts. Initial public offerings and short-term debt would be exempted.” Schatz stated:

During the pandemic, Wall Street has cashed in on high-risk trades that add no real value to our economy and leave working families behind. We need to curb this dangerous trading to reduce volatility in the markets and encourage investment that can actually help our economy grow. By raising the price of financial transactions, we can make our financial system work better while bringing in billions in new revenue that we can reinvest in our workers and our communities.

Scott Smith concurs, noting that millions of people were forced into poverty during the first two years of the pandemic. In the same two years, the 10 richest men in the world doubled their fortunes and a new billionaire was minted every 26 hours. Much of this disparity was fueled by fiscal and monetary policy aimed at relieving the effects of the pandemic and of the 2008-09 banking crisis. Smith writes:

Our burgeoning monetary economy has fueled the rise of securitization, private equity, hedge funds, the foreign exchange market, commodity trading, cryptocurrency, digital assets, and investments in China. Quantitative easing further fanned these flames, driving up the price of financial assets. All such assets are monetary equivalents, and, thus, inflating the price of such assets balloons the money supply.

What many lauded as a robust economy was really monetary inflation. This makes it more difficult for the next generation to start life. Monetary inflation moves a select few out of the middle class, making them newly rich, while relegating many more to being poorer.

… The trading of financial assets in the monetary economy represents the majority of the payments in the economy, eclipsing payments related to wages or the purchase of goods or services. Thus, it would be wealthy individuals and institutions, such as hedge funds, that would shoulder most of the burden of a payment tax.

Predictably, the Wall Street Tax Act has gotten pushback and has not gotten far. But Smith says his proposal is different. It is not adding a tax but is replacing existing taxes – with something that is actually better for most taxpayers. He has asked a number of hedge fund managers, day traders, private equity fund managers, and venture capital managers if a quarter-point tax would impact their businesses. They have shrugged it off as not significant, and have said that they would certainly prefer a payments tax to income taxes.

Responding to the Critics: The Sweden Debacle

Among failed FTT attempts, one often cited by critics was undertaken in Sweden in the 1980s. As reported by the Securities Industry and Financial Markets Association (SIFMA):

There were negative capital markets impacts seen in the great migration of trading volumes across multiple products to London, equity index returns fell, volatility increased and the interest rate options markets essentially disappeared.

But as argued by James Li in a podcast titled “The Truth About a Financial Transaction Tax“:

Sweden’s tax policy … had an obvious, massive loophole, which is that Swedish traders could migrate to the London Stock Exchange to avoid the tax — which they did, until it was eventually abolished. On the other hand, the UK’s financial transaction tax has been much more successful. In 1694, King William III levied a stamp duty on all paper transactions, and a version of that levy still exists today, taxing many stock trades at 0.5 percent. Unlike the defunct Swedish tax, it applies to trades of shares of any UK company, regardless of where traders are based.

Again, Smith argues that the challenges met by other transaction tax proposals have arisen because they were being proposed as an additional tax. A payment tax in lieu of personal and corporate income taxes takes on a whole different character. He argues that big firms, rather than moving offshore to avoid a payments tax, would move to the U.S., since the tax rate in other nations would be much higher. Without a corporate or income tax, the U.S. would be the most favored tax haven in the world.

He adds that an exit tax could be a good idea: any money leaving the U.S. could be taxed at a 5% rate. That would discourage people from wiring money to an offshore exchange. But incoming money would not be taxed, encouraging foreign money to come to the U.S. to stay long-term, where it would be taxed less than elsewhere.

The Alleged Threat to Retirees

James Li’s favorite myth about a financial transactions tax is that it would be devastating for Main Street investors. He cites a report from the Modern Markets Initiative on the effects of the tax on savings and retirement security. A Business Wire headline on the report warns, “Latest Data from Modern Markets Initiative Shows the Financial Transaction Tax Would Threaten the Retirement Savings of Millions of Americans.” Among other claims is that a financial transactions tax would cost “$45,000 to $65,000 in FTT over the lifetime of a 401(k) account, or the equivalent of delaying the average individual’s retirement by approximately two years.” How that calculation was made is not included in the article, which refers the reader to the report. Li looked it up, and says on his podcast that it was highly misleading:

[T]he study stated that under this type of tax, for every $100,000 of assets in a 401(k) plan, the saver would owe $281 dollars in FTT taxes in a given year; and then over a 40-year time horizon paying in at $281 a year at 7% annual growth – the average for pension funds – that this would yield a total value of $64,232 after 40 years.

… [What they were] actually saying is, “If you put $100,000 a year into your 401(k), you would be paying approximately $281 in taxes for that $100,000; and if you had instead invested that money every year in a fund with 7% interest, that amount would add up to about $64,000 after 40 years.”

… I don’t know about you, but I can’t put $100,000 in my 401(k) plan every year. Very few people can. A more accurate estimate on how this would actually impact the average retirement savings is to look at the median income, which is around $52,000 a year, with an estimated $5,000 contribution into a 401(k) annually, which is around 10% of your gross pay based on commonly accepted financial planning advice. So the average person would only pay about $13 in FTT taxes in a given year.

These people are extremely tricky and their logic is also extremely flawed, because we pay taxes all the time. It’s like saying, “Oh, if I didn’t have to pay an income tax, I would be able to put all that money away and be up like a million bucks when I retire.”

Similar arguments are made concerning potential losses from FTTs to pension funds and the stock market. SIFMA contends, “What’s bad for the capital markets is bad for the economy,” stating “The capital markets fund 65% of economic activity in the U.S.” Perhaps, but the money paid for shares of stock traded in the stock market does not go to the corporations issuing the stock. It goes to the previous shareholders. Only the sale of IPOs – initial public offerings – generates money for the corporation, and this money is typically exempted from FTTs. Trades after that are simply gambling, hoping to sell at a higher price to the “greater fool.”

Killing the Parasite That Is Killing the Host

In the 2015 book Killing the Host – How Financial Parasites and Debt Destroy the Global Economy, Michael Hudson calls “finance capitalism” a parasite that is consuming the fruits of “industrial capitalism” – the goods and services traded in what Smith calls the material economy. Pam Martens writes in a review of Hudson’s book that this “blood-sucking financial leech [is] affixed to your body, your retirement plan, and your economic future.”

But it is not actually the pension funds that are doing most of the financialized trades or that would get taxed on those trades. It is their asset managers – including BlackRock and Vanguard, both of which lost money overall in 2022. If the asset managers can’t make money in the financialized economy, perhaps it would be better for the pension funds to move to more productive investments – from “finance capitalism” to “industrial capitalism.”

Publicly-owned banks mandated to serve the public interest would be good options if we had them. As the economy falters, the public banking movement is picking up steam, part of a much-needed shift towards an economy that puts the public interest above private profits.

Notes.

[i] Bank for International Settlements, https://stats.bis.org/statx/toc/CPMI.html (Data on cashless payments, payment systems, service providers, counterparties, clearing houses, and central security depositories. Click on the United States, https://www.bis.org/statistics/rpfx22.htm?m=2617 (Data on OTC FX and IR derivative), https://stats.bis.org/statx/srs/table/d1 (Data on XT futures and options), https://stats.bis.org/statx/srs/table/d11.2. (Data on OTC FX Instruments), Federal Reserve Bank of New York, https://www.newyorkfed.org/medialibrary/Microsites/fxc/files/2022/aprfxsurvey2022.pdf (Data on XT Derivatives), Cboe Global Markets, https://www.cboe.com/us/equities/market_statistics/historical_market_volume/ (Data on stock market volumes). All data is the latest available. Most categories are for 2020, some categories are for 2021 and 2022.

This article was first posted on ScheerPost. 

This content originally appeared on CounterPunch.org and was authored by Ellen Brown.

A small financial transactions tax could correct a number of maladies in our economic system, from the federal debt crisis to the widening wealth divide to the rampant financialization of the economy, while eliminating taxes on income and sales.

The debt ceiling crisis has again brought into focus the perennial gap between what the government spends and what it accumulates in taxes, and the virtual impossibility of closing that gap by increasing taxes or negotiating cuts in the budget.

In a 2023 book titled A Tale of Two Economies: A New Financial Operating System for the American Economy, Wall Street veteran Scott Smith shows that we would need to tax everyone at a rate of 40%, without deductions, to balance the budgets of our federal and local governments – an obvious nonstarter. The problem, he argues, is that we are taxing the wrong things – income and physical sales. In fact, we have two economies – the material economy in which goods and services are bought and sold, and the monetary economy involving the trading of financial assets (stocks, bonds, currencies, etc.) – basically “money making money” without producing new goods or services.

Drawing on data from the Bank for International Settlements and the Federal Reserve, Smith shows that the monetary economy is hundreds of times larger than the physical economy. The budget gap could be closed by imposing a tax of a mere 0.1% on financial transactions, while eliminating not just income taxes but every other tax we pay today. For a financial transactions tax (FTT) of 0.25%, we could fund benefits we cannot afford today that would stimulate growth in the real economy, including not just infrastructure and development but free college, a universal basic income, and free healthcare for all. Smith contends we could even pay off the national debt in ten years or less with a 0.25% FTT.

A radical change in the tax structure may seem unlikely any time soon, due to the inertia of Congress and the overweening power of the financial industry. But as economist Michael Hudson and other commentators observe, the U.S. has reached its limits to growth without some sort of debt write down. Federal interest expense as a percent of tax revenues spiked to 32.9% in the first quarter of 2023, and it will spike further as old securities at lower interest rates mature and are replaced with new ones at much higher interest. A financial reset is not only necessary but may be imminent. Promising proposals like Smith’s can lead the way to a much-needed shift from serving “capital” to serving productivity and the broader public interest.

A Look at the Numbers

The material economy is roughly measured by the annual Gross Domestic Product (GDP), which for the U.S. had reached $25.6 trillion by the third quarter of 2022. (Michael Hudson observes that even GDP, as currently measured, is largely composed of non-productive financial services.) GDP is defined by spending, which depends on income. Collectively, Americans earned $21 trillion in 2021. The monetary economy is defined as the total amount of money that changes hands each year. Smith draws his figures from data that the Federal Reserve publishes annually in the Bank for International Settlements’ Red Book. The Red Book is not all-inclusive; it leaves out such payments as commodity trading, various options, crypto currency trades, and exchange-traded funds. But even its partial accounting shows $7.6 quadrillion in payments – more than 350 times our national collective income. Smith includes this chart:

Smith comments:

Most of these payments have little to do with what we regard as the real economy— the purchase of goods and services and the supply chain. Our GDP represents less than 0.33% of the payments in our economy. Once we see the big picture, the solution is obvious. We should tax payments instead of our income.

He calculates that U.S. spending by federal, state and local governments will total around $8.5 trillion in 2023. Dividing $7,625 trillion in payments by $8.5 trillion in government spending comes to a little more than 0.001, or a tenth of a percent (0.1%). Taxing payments at 0.1% could thus eliminate every tax we pay today, including social security (FICA) taxes, sales taxes, property taxes, capital gains taxes, estate taxes, gift taxes, excise taxes and customs taxes. With a 0.25% FTT, “If you have a net worth of $20 million or less, you would come out ahead. And if you make $500 million per year, you will finally be paying your fair share of taxes – $1.25 million!”

Bridging the Wealth Gap

The financial transaction tax is not a new concept. The oldest tax still in existence was a stamp duty at the London Stock Exchange initiated in 1694. The tax was payable by the buyer of shares for the official stamp on the legal document needed to formalize the purchase. Many other countries have imposed FTTs, including the U.S. — some successfully and some not. In January 2021, U.S. Rep. Peter DeFazio reintroduced The Wall Street Tax Act, which was accompanied in March 2021 by a Senate bill introduced by Sen. Brian Schatz. According to a press release on the Schatz bill, the tax “would create a 0.1% tax on each sale of stocks, bonds, and derivatives, which will discourage unproductive trading and redirect investment toward more productive areas of the economy. The new tax would apply to the fair market value of equities and bonds, and the payment flows under derivatives contracts. Initial public offerings and short-term debt would be exempted.” Schatz stated:

During the pandemic, Wall Street has cashed in on high-risk trades that add no real value to our economy and leave working families behind. We need to curb this dangerous trading to reduce volatility in the markets and encourage investment that can actually help our economy grow. By raising the price of financial transactions, we can make our financial system work better while bringing in billions in new revenue that we can reinvest in our workers and our communities.

Scott Smith concurs, noting that millions of people were forced into poverty during the first two years of the pandemic. In the same two years, the 10 richest men in the world doubled their fortunes and a new billionaire was minted every 26 hours. Much of this disparity was fueled by fiscal and monetary policy aimed at relieving the effects of the pandemic and of the 2008-09 banking crisis. Smith writes:

Our burgeoning monetary economy has fueled the rise of securitization, private equity, hedge funds, the foreign exchange market, commodity trading, cryptocurrency, digital assets, and investments in China. Quantitative easing further fanned these flames, driving up the price of financial assets. All such assets are monetary equivalents, and, thus, inflating the price of such assets balloons the money supply.

What many lauded as a robust economy was really monetary inflation. This makes it more difficult for the next generation to start life. Monetary inflation moves a select few out of the middle class, making them newly rich, while relegating many more to being poorer.

… The trading of financial assets in the monetary economy represents the majority of the payments in the economy, eclipsing payments related to wages or the purchase of goods or services. Thus, it would be wealthy individuals and institutions, such as hedge funds, that would shoulder most of the burden of a payment tax.

Predictably, the Wall Street Tax Act has gotten pushback and has not gotten far. But Smith says his proposal is different. It is not adding a tax but is replacing existing taxes – with something that is actually better for most taxpayers. He has asked a number of hedge fund managers, day traders, private equity fund managers, and venture capital managers if a quarter-point tax would impact their businesses. They have shrugged it off as not significant, and have said that they would certainly prefer a payments tax to income taxes.

Responding to the Critics: The Sweden Debacle

Among failed FTT attempts, one often cited by critics was undertaken in Sweden in the 1980s. As reported by the Securities Industry and Financial Markets Association (SIFMA):

There were negative capital markets impacts seen in the great migration of trading volumes across multiple products to London, equity index returns fell, volatility increased and the interest rate options markets essentially disappeared.

But as argued by James Li in a podcast titled “The Truth About a Financial Transaction Tax“:

Sweden’s tax policy … had an obvious, massive loophole, which is that Swedish traders could migrate to the London Stock Exchange to avoid the tax — which they did, until it was eventually abolished. On the other hand, the UK’s financial transaction tax has been much more successful. In 1694, King William III levied a stamp duty on all paper transactions, and a version of that levy still exists today, taxing many stock trades at 0.5 percent. Unlike the defunct Swedish tax, it applies to trades of shares of any UK company, regardless of where traders are based.

Again, Smith argues that the challenges met by other transaction tax proposals have arisen because they were being proposed as an additional tax. A payment tax in lieu of personal and corporate income taxes takes on a whole different character. He argues that big firms, rather than moving offshore to avoid a payments tax, would move to the U.S., since the tax rate in other nations would be much higher. Without a corporate or income tax, the U.S. would be the most favored tax haven in the world.

He adds that an exit tax could be a good idea: any money leaving the U.S. could be taxed at a 5% rate. That would discourage people from wiring money to an offshore exchange. But incoming money would not be taxed, encouraging foreign money to come to the U.S. to stay long-term, where it would be taxed less than elsewhere.

The Alleged Threat to Retirees

James Li’s favorite myth about a financial transactions tax is that it would be devastating for Main Street investors. He cites a report from the Modern Markets Initiative on the effects of the tax on savings and retirement security. A Business Wire headline on the report warns, “Latest Data from Modern Markets Initiative Shows the Financial Transaction Tax Would Threaten the Retirement Savings of Millions of Americans.” Among other claims is that a financial transactions tax would cost “$45,000 to $65,000 in FTT over the lifetime of a 401(k) account, or the equivalent of delaying the average individual’s retirement by approximately two years.” How that calculation was made is not included in the article, which refers the reader to the report. Li looked it up, and says on his podcast that it was highly misleading:

[T]he study stated that under this type of tax, for every $100,000 of assets in a 401(k) plan, the saver would owe $281 dollars in FTT taxes in a given year; and then over a 40-year time horizon paying in at $281 a year at 7% annual growth – the average for pension funds – that this would yield a total value of $64,232 after 40 years.

… [What they were] actually saying is, “If you put $100,000 a year into your 401(k), you would be paying approximately $281 in taxes for that $100,000; and if you had instead invested that money every year in a fund with 7% interest, that amount would add up to about $64,000 after 40 years.”

… I don’t know about you, but I can’t put $100,000 in my 401(k) plan every year. Very few people can. A more accurate estimate on how this would actually impact the average retirement savings is to look at the median income, which is around $52,000 a year, with an estimated $5,000 contribution into a 401(k) annually, which is around 10% of your gross pay based on commonly accepted financial planning advice. So the average person would only pay about $13 in FTT taxes in a given year.

These people are extremely tricky and their logic is also extremely flawed, because we pay taxes all the time. It’s like saying, “Oh, if I didn’t have to pay an income tax, I would be able to put all that money away and be up like a million bucks when I retire.”

Similar arguments are made concerning potential losses from FTTs to pension funds and the stock market. SIFMA contends, “What’s bad for the capital markets is bad for the economy,” stating “The capital markets fund 65% of economic activity in the U.S.” Perhaps, but the money paid for shares of stock traded in the stock market does not go to the corporations issuing the stock. It goes to the previous shareholders. Only the sale of IPOs – initial public offerings – generates money for the corporation, and this money is typically exempted from FTTs. Trades after that are simply gambling, hoping to sell at a higher price to the “greater fool.”

Killing the Parasite That Is Killing the Host

In the 2015 book Killing the Host – How Financial Parasites and Debt Destroy the Global Economy, Michael Hudson calls “finance capitalism” a parasite that is consuming the fruits of “industrial capitalism” – the goods and services traded in what Smith calls the material economy. Pam Martens writes in a review of Hudson’s book that this “blood-sucking financial leech [is] affixed to your body, your retirement plan, and your economic future.”

But it is not actually the pension funds that are doing most of the financialized trades or that would get taxed on those trades. It is their asset managers – including BlackRock and Vanguard, both of which lost money overall in 2022. If the asset managers can’t make money in the financialized economy, perhaps it would be better for the pension funds to move to more productive investments – from “finance capitalism” to “industrial capitalism.”

Publicly-owned banks mandated to serve the public interest would be good options if we had them. As the economy falters, the public banking movement is picking up steam, part of a much-needed shift towards an economy that puts the public interest above private profits.

This content originally appeared on Dissident Voice and was authored by Ellen Brown.

Journalist Muhammad Asrul is awaiting word from Indonesia’s Supreme Court about whether he will spend further time behind bars for reporting on corruption issues. The decision will have a profound impact not only on his life but also on press freedom in Indonesia.

The country is at a turning point following its transition at the end of the 20th century from military dictatorship to democracy.

Many, including civil society and members of the judiciary, have sought to protect journalists — they see a free, functioning press as part of Indonesia’s future.

• READ MORE: Jail sentence for Indonesian reporter who covered corruption
• Other media freedom in Indonesia reports

Others, however, are waging a battle against independent media and freedom of speech, through prosecutions like Asrul’s and through the impending passage of a criminal code that smacks of authoritarianism. With Indonesia’s two-decade-old democratic path in real jeopardy, the next several months will be decisive.

In 2019, Asrul penned a series of articles alleging corruption by a local political official. The same official filed a complaint with the police, who subsequently arrested and detained Asrul.

After spending more than a month in jail as the police conducted investigations, Asrul was prosecuted under the country’s draconian Electronic Information and Transactions Law (ITE Law), which criminalises the electronic transmission of information that defames or affronts.

At the end of 2021, a court found Asrul guilty and sentenced him to three months in prison.

Police bypassed Press Council
While this would be egregious enough on its own, in Asrul’s case the police chose to bypass Indonesia’s Press Council.

The Press Council is an independent government body tasked with protecting journalists in press-related disputes. The police are supposed to coordinate with the Press Council to determine whether a case should be funnelled into the criminal justice system or resolved through mediation or other solutions outside of the courts.

But the police did not give the council a chance to settle the complaint against Asrul, sidestepping this critical institution. Equally worrying, the court that convicted Asrul stated that the police have the power to override the Press Council in a range of situations, including where individuals offended by news articles go straight to the police instead of the council.

The Clooney Foundation for Justice’s TrialWatch initiative, where I work as a senior programme manager, monitored Asrul’s trial through its partner the American Bar Association Center for Human Rights.

This coming week, we will file an amicus brief requesting that the Supreme Court overturn Asrul’s conviction and ensure that the protections offered by Indonesia’s Press Council remain a reality for journalists throughout Indonesia.

TrialWatch monitors trials such as Asrul’s in more than 35 countries, seeking to overturn unjust convictions against journalists and marginalised individuals and to reform the laws used to target them.

The ITE Law is one such example. Since its enactment in 2008, the ITE Law has been a key tool in suppressing freedom of expression and press freedom in Indonesia, with prosecutions spiking in recent years.

81 people charged
During the first nine months of 2021, for example, at least 81 people were charged with violating the ITE Law, “most of them accused of defamation” — the provision under which Asrul was prosecuted. Those found guilty of defamation can face up to four years behind bars.

While the ITE Law has been a darling of government officials seeking to quash legitimate criticism, it has also been deployed by businesses and other powerful actors who simply do not like what someone has posted online.

TrialWatch recently monitored a trial in which a woman, Stella Monica, was prosecuted for Instagram complaints about acne treatment she received at a dermatology clinic. Monica was acquitted but the clinic aggressively pursued the case, subjecting her to almost two years of legal proceedings.

This playbook for stifling speech may soon receive a boost with the revision of Indonesia’s colonial-era criminal code. In many countries, the amendment of colonial laws has been a step forward, but Indonesia’s iteration is so regressive that when a draft was published in 2019 it triggered widespread protests.

Although the government withdrew the legislation following the protests, this year the new code was resurrected, retaining provisions from the 2019 version that endanger press freedom.

In addition to providing for a potential jail sentence of up to three years for perceived insults to the president and vice-president, the draft code criminalises the dissemination of “incomplete” news and so-called “fake news”.

In neighbouring countries like Cambodia, we have seen fake news provisions deployed against those who criticise the authorities.

Attempts to hide developments
Just how troubling these developments are is clear from the Indonesian government’s attempts to hide them. The Deputy Law and Human Rights Minister in charge of the revision process had previously pledged that the legislature would vote on the code by August 17, Indonesia’s Independence Day.

He also stated that the authorities would not share the draft text with either civil society or the public because of the risk of disorder. After an outcry, however, the government published the draft in July and promised further consultations, still leaving civil society with scant time to deliberate and engage the government if the vote indeed takes place in the next few months.

While passage of the code in its current form would be a triumph for government officials and corporate interests seeking to restrict critical speech, it would also be a victory for the increasingly powerful conservative Islamist parties on which President Joko Widodo has relied to maintain power.

The draft code falls squarely on the side of conservatives in Indonesia’s roiling cultural battles, threatening jail time for sex and co-habitation before marriage, which would also functionally criminalise LGBTQ+ relationships. Another provision swells the already expansive blasphemy law, extending it to criminalise comments made on social media.

Although the draft code reflects the reality that repressive forces are gaining ground, there is still hope that the authorities will side with those fighting for fundamental freedoms. The government has shown itself to be responsive not only to pressure from hardliners but also to pressure from pro-democracy forces.

The withdrawal of the code after the 2019 protests and the recent sharing of the draft text are good examples. In another recent example, after enduring intense criticism about overly broad enforcement of the ITE Law, President Widodo commissioned guidelines limiting its application — in particular against journalists.

The guidelines, which were introduced after Asrul’s case had already begun, explicitly state that in cases where a news outlet has published an article, then press regulations — not the ITE law — should apply. While enforcement has been shaky thus far, the guidelines demonstrate the power of public pressure and are an additional tool in the battle for press freedom.

Institutional safeguards
Other institutional safeguards are in place. Indonesia’s Press Council has a mandate that puts it on the same level as other government entities and gives it real power to protect journalists — hence the importance of Asrul’s case and the impending Supreme Court decision on the Council’s role.

To show how significant the Press Council is we need only hop across the ocean, where press freedom advocates in Malaysia have been fighting to establish a similar mechanism for years, recognising its potential to stop the harassment of independent media.

The courts are also making positive noises. In the face of campaigns by government officials, religious conservatives and businesses to clamp down on speech, some judges have ruled in favour of human rights protections — from the acquittal of Monica for her dermatological troubles to a recent high-profile acquittal in a blasphemy prosecution.

What this means is that unlike in countries where the decks are stacked, with the legislature, judiciary and press co-opted by authoritarian powers, all is not lost in Indonesia. Civil society has proven that it can mobilise and that institutional levers can be pulled.

But this upcoming period will be crucial. Buffeted by competing winds, the Indonesian government will decide whether to move forward with the current version of the new criminal code. Actors at the local level, like police and prosecutors, will decide whether to enforce — or not enforce — rights-positive guidelines and laws.

The judiciary will consider cases with wide-ranging consequences for press freedom and freedom of speech, like that of Muhammad Asrul. And even if the criminal code is passed, it awaits a barrage of constitutional challenges, putting the judiciary in the spotlight.

Through its TrialWatch initiative, the Clooney Foundation for Justice will continue to monitor these courtroom battles and advocate for those unjustly targeted in criminal prosecutions. With key decisions forthcoming, the fate of Asrul and many others hang in the balance.

Kyle Delbyck is senior programme manager at the Clooney Foundation for Justice’s TrialWatch initiative, where she coordinates trial observations and ensuing advocacy.  Grace Hauser, TrialWatch legal fellow at the Clooney Foundation for Justice, contributed to this article. First published by Al Jazeera English, it is republished under a Creative Commons licence.

This content originally appeared on Asia Pacific Report and was authored by Pacific Media Watch.