Taxing Wall Street Speculation

Ethical Markets also supports the financial transactions tax since 1995! Nice it’s now gaining traction globally! Hazel Henderson, Editor

Taxing Wall Street Speculation

There’s Another, Better Way To Go After the 1 Percent Than the Obama Administration’s Proposed “Buffett Rule.”

by Wallace Turbeville

As the White House mounts a major campaign to sell the “Buffett Tax” this week, there is another, better tax on the 1 percent that Washington should be considering: A financial-transaction tax?better known as a financial speculation tax (FST).

A financial-speculation tax has been discussed, from time to time intensely, ever since the financial crisis of 2008 riveted attention on the markets that drove the economy to the edge of a Great Depression-quality abyss. One motivation was to make the perpetrators pay, as the public focused on bonuses at levels befitting Croesus and callous disregard for the responsibility borne by the banks for the great recession. But the financial-transaction tax is also good policy. Under the concept, financial transactions?purchases and sales of equity shares and bonds and the execution of derivatives?are taxed based, at least in part, on the size of the transactions. As a revenue source, it has great potential: An FST could easily raise more than $150 billion a year, according to some estimates, depending on the details of the tax and trading volumes in a post-tax environment.

The FST could rein in some of the worst excesses of financial markets that too often operate like casinos. By increasing the costs of placing trades, the tax would moderate trading activity generally, but it would most strongly deter short-term trades rather than longer-term investments. Importantly, for example, an FST could reduce the profitability of high-frequency trading, whereby computerized trading system enter and exit trading markets many times during the day?a practice that regulators worry gives an unfair advantage to some firms and increases market volatility.

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