The Case for a Tax on Financial Transactions

[kentuck]

<snip>
WASHINGTON — LIKE it or not, the campaign season is upon us, and that almost certainly means somebody is going to try to buy your vote with a tax cut — even though average federal tax rates are already low in historical terms, our tax code remains tilted in favor of the wealthy, and our children, neighborhoods and infrastructure desperately need public investment.

What would really be interesting is if a candidate proposed the opposite: a new way to raise more revenues.

Senator Bernie Sanders of Vermont, who is seeking the Democratic nomination for president, has done just that, by proposing a financial transaction tax: a small excise tax, typically a few hundredths of a percent, on trades of stocks, bonds, derivatives and other securities. An itty-bitty, one-basis-point transaction tax (a basis point is one-hundredth of a percentage point, or 0.01 percent) would raise $185 billion over 10 years, according to new estimates by the nonpartisan Tax Policy Center. That would be enough to finance an ambitious expansion of prekindergarten programs for 3- and 4-year-olds and restore funding of college assistance for low-income students.

What’s more, a financial transaction tax could significantly reduce the amount of high-frequency trading. This trading, most of it automated, is used to make windfall profits through arbitrage (taking advantage of small differences in price) in milliseconds. It does nothing to help ordinary investors and can destabilize financial markets.

....more at link

http://www.nytimes.com/2015/07/22/opinion/the-case-for-a-tax-on-financial-transactions.html?ref=us&_r=0

[geek tragedy]

1. He makes a lot of sense. 1-5 bps makes sense. nt

[1939]

2. I would triple the rate of tax, but make it only on sales of securities

and make it tax free if the security has been held two years or more.

Incentivize investment, discourage trading and manipulation.

[TreasonousBastard]

3. I've been saying this for years, and...

don't understand why it's not populist dogma.

We've got people here on Long Island paying over 20 grand a year in property taxes with little personal savings and no stock trading revenue at all who are against a trading tax but who whine about poverty programs breaking them.

Wall Street has the money, so that's where we go for taxes.

[Gothmog]

4. HFT or high frequency trading should be taxed

[meaculpa2011]

5. States and localities should extend the sales tax...

to every transaction.

When I buy a hot dog in New York for two dollars seventeen cents goes to the state and city.

When a high-frequency trader buys $100 million in securities and sells it a millisecond later there's no sales tax.

You can make all the arguments in the world about liquidity, etc. however there is no justification for taxing some transactions but not others.

[Kelvin Mace]

6. This would discourage churning and day trading

In addition, I would adjust the cap gains tax to 90% for any gain realized in less than 1 day. Then the rate would decrease as the longer you held stock.

>1 day to 30 days - 80%
>30 days to 1 year - 75%
>1 year to 5 years - 60%
>5 years to 10 years - 30%
>10 year to 20 years - 20%
>20 years to 30 years - 10%
>30 year - 5%
>30 years and you are over 65 - 2.5%

This encourages people to buy and hold, instead of speculate. This would make people a lot pickier about stocks and less tolerant of management that mismanages.

[pampango]

7. Bernie: "Why can't we be more like Scandanavia?" - "EU sees financial transaction tax in place early

2017"

Negotiations over a planned tax on financial transactions in 11 European countries could wrap up later this year and the levy could be in place by early 2017, EU Economic Affairs Commissioner Pierre Moscovici said on Wednesday.

France and Germany proposed the tax in 2012, but talks among the 11 countries that have agreed to levy it have stalled over what financial instruments should be covered and at what rate.

BNP Paribas deputing chief operating officer Alain Papiasse said that financial companies in the countries covered by the tax were considering moving operations to London, which has spurned the levy from the start.

"The big risk for the European Union and the finance ministers concerned is to have a tax that doesn't bring anything in and causes business to leave for a financial centre respected by all but which is asking itself whether it wants to be in the European Union," Papiasse said in response to Moscovici.

http://www.reuters.com/article/2015/07/08/eu-tax-idUSL8N0ZO1YC20150708

Europe is further along with the idea of a financial transactions tax. The UK is, as usual, less amenable to continental cooperation on the matter. Perhaps it would be better for the EU if the UK went ahead and left it. London can then benefit from the relocation of large financial institutions that want to leave the EU and, perhaps, eventually the US if we ever do adopt such a tax.