Sachs has joined a London-based campaign for an EU tax on banks, heaping criticism on the US for ignoring the public good.
The economist encouraged the EU to draw up a plan on a financial sector tax at the next meeting of EU finance ministers on 16 March, even though the US is not on board yet.
Sachs told EurActiv that an overwhelming public mood in favour of a tax on banks will push governments to legislate soon and that the EU should impose a "broad-based" tax at a "modest rate".
"We have a huge budget hole in the US and in Europe and I think there is plenty of evidence that the financial sector is under-taxed and under-regulated," Sachs argued.
Both the UK and the US have been waiting for an IMF paper, due in April, and are weighing up the costs and benefits of the tax before they come to a decision.
Currently the US and the UK have different views on which instruments and banks should be taxed.
The UK has put its weight behind a straightforward Financial Transactions Tax (FTT) that would target a large part of the sector, whereas the US has been criticised for focusing its so-called "bank levy" on the balance sheets of large institutions.
Sachs lambasted his own government's narrow proposal for ignoring the public good and focusing on raising revenues for its "war chest for future crises".
"We should go beyond narrow banking to include derivative assets like credit default swaps," he said.
Though banks and consumers fear such a tax would either increase the cost of borrowing or reduce available credit on banks' books, Sachs argues that governments need to test the tax first before setting their proposals in stone.
Sachs said that a holistic financial sector tax could help tackle huge budget deficits in the US and in the EU and would help governments to make good on the development aid commitments they agreed to at the Gleneagles summit in 2005.
Five years ago, 15 countries committed to giving a minimum of 0.51% of their national income in 2010 to developing nations.
"We are about 22-25 billion dollars short of our commitments for this year and a financial transaction tax would help close the gap," Sachs said.
