Sunday, April 17, 2011

Arguments against a Financial transaction tax are Bogus.


One of the proposed ways of both making the finance industry pay a small proportion of the costs they inflict on our society and slowing unproductive capital flows is the Tobin, or Robin hood, tax on financial transactions.

Otherwise simply called a financial transaction tax (FTT).

Of course any means of bringing the excessive profits of the finance industry to heel are damned with faint praise or a raft of specious reasons why they do not think it will work.

It is, of course, a very unpopular idea also, with those who juggle money among different countries to minimise tax.

Arguments against FTT are bogus.

The arguments for  FTT are many.
Replacing some or all of taxes on productive workers and industry. As Adam Smith said the owners of capital should pay taxes. Taxes paid by workers and entrepreneurs, on production, are a drag on increasing overall wealth.
Taxing people who largely avoid it at present enables the tax base to be broadened.
It slows the pace of wealth transfer from the productive economy towards speculation in money.
If enough countries agree it can slow damaging capital flows and speculation on currency.

1 comment:

  1. The problem with a FTT is the very rich can mostly avoid it and moderatly rich, middle classes and poor cannot.

    It does depend what you apply it to, but simple ones that apply to all financial transactions are *very* regressive. Sort of a "Nottingham Sheriff" tax.

    The very rich simply perform all their transactions in overseas jurisdictions.

    The banks will minimise their transactions using accounting tricks.

    There are good and bad ways of implementing a transaction tax. Good ways discourage speculation but raise SFA revenue, bad ways raise revenue but are very regressive.