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Wed Nov 28, 2012, 10:55 AM

Financial Transaction Tax and the Fiscal Curb

Any chance the democrats would throw this idea into the negotiating mix on the fiscal curb?

History of the concept

John Maynard Keynes (1946) envisioned the financial transaction tax in 1936
The year 1694 saw an early implementation of a financial transaction tax in the form of a stamp duty at the London Stock Exchange. The tax was payable by the buyer of shares for the official stamp on the legal document needed to formalize the purchase. As of 2011, it is the oldest tax still in existence in Great Britain.[8] In 1936, in the wake of the Great Depression, John Maynard Keynes advocated the wider use of financial transaction taxes.[4][9] He proposed the levying of a small transaction tax on dealings on Wall Street, in the United States, where he argued excessive speculation by uninformed financial traders increased volatility (see Keynes financial transaction tax below). In 1972, the Bretton Woods system for stabilizing currencies effectively came to an end. In that context, James Tobin, influenced by the work of Keynes, suggested his more specific currency transaction tax for stabilizing currencies on a larger global scale.[10] In 1989, Edgar Feige generalized the ideas of Keynes and Tobin by proposing a small flat rate tax on all transactions. This automated payment transaction tax was subsequently presented to the President's Advisory Panel on Federal Tax Reform in Washington, DC.[11]. In December 1994, the economic crisis in Mexico hurt its currency. In that context, Paul Bernd Spahn re-examined the Tobin tax, opposed its original form, and instead proposed his own version in 1995.[12][13] In the context of the financial crisis of 2007–2010, many economists, governments, and organizations around the world re-examined, or were asked to re-examine, the concept of a financial transaction tax, or its various forms. As a result, various new forms of financial transaction taxes were proposed, such as the EU financial transaction tax.

Although every financial transaction tax (FTT) proposal has its own specific intended purpose, there are some general intended purposes which are common to most of them. Below are some of those general commonalities. The intended purpose may or may not be achieved.


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Reply Financial Transaction Tax and the Fiscal Curb (Original post)
Pryderi Nov 2012 OP
PETRUS Nov 2012 #1
Trillo Nov 2012 #2
Pryderi Nov 2012 #3

Response to Pryderi (Original post)

Wed Nov 28, 2012, 01:27 PM

2. Bank transaction tax?

From your link:
Bank transaction tax
Main article: Bank transaction tax

Between 1982 and 2002 Australia charged a bank account debits tax on customer withdrawals from bank accounts with a cheque facility. Some Latin American countries also experimented with taxes levied on bank transactions. Argentina introduced a bank transaction tax in 1984 before it was abolished in 1992. Brazil implemented its temporary "CPMF" in 1993, which lasted until 2007. The broad based tax levied on all debit (and/or credit) entries on bank accounts proved to be evasion-proof, more efficient and less costly than orthodox tax models.[31]

Automated Payment Transaction tax (APT tax)
Main article: Automated Payment Transaction tax

In 1989, Edgar L. Feige proposed a synthesis and extension of the ideas of Keynes and Tobin by proposing a flat rate tax on all transactions.[32] The total volume of all transactions undertaken in an economy represents the broadest possible tax base and therefore requires the lowest flat tax rate to raise any requisite amount of revenue.


Don't forget there are also private "fees" associated with the use of these things. A danger in them being "private" is that use of a national currency naturally concentrates profit in the hands of those charging debit card transaction fees.

A tax is presumably different from a fee, in that a tax goes to the government, potentially benefitting all of us (in a "perfect" world).

There certainly is an argument for folks to not keep their money in a bank, or if they receive a check, to cash it in its entirety, and just use that instead of debit cards. Additionally, with the use of debit cards, there's the third party who observes the transaction, and accumulates this as a data point in their private database, which can be another source of income for them.

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Response to Trillo (Reply #2)

Wed Nov 28, 2012, 03:22 PM

3. No. Only on stock transactions. More from the link:

John Maynard Keynes was among the first proponents of a securities transaction tax.[4] In 1936 he proposed that a small tax should be levied on dealings on Wall Street, in the United States, where he argued that excessive speculation by uninformed financial traders increased volatility. For Keynes, the key issue was the proportion of ‘speculators’ in the market, and his concern that, if left unchecked, these types of players would become too dominant.[4] Keynes writes: "The introduction of a substantial Government transfer tax on all transactions might prove the most serviceable reform available, with a view to mitigating the predominance of speculation over enterprise in the United States. (1936:159-60)"[4]

The US imposed a financial transaction tax from 1914 to 1966. The federal tax on stock sales of 0.1 per cent at issuance and 0.04 per cent on transfers. Currently, the US has a very minor 0.0034 per cent tax which is levied on stock transactions. The tax, known as Section 31 fee, is used to support the operation costs of the Securities and Exchange Commission (SEC). In 1998, the federal government collected $1.8 billion in revenue from these fees, almost five times the annual operating costs of the SEC.[40]

We should raise it back up to 0.1 per cent from the current 0.0034.

It would be a source for revenue.

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