Bloomberg is reporting a Tobin Tax is gaining momentum.
John Maynard Keynes proposed a tax on financial transactions in the middle of the Great Depression, and another economist, James Tobin, revived the idea in the 1970s as a way to counter currency market speculation. Neither effort gained much acceptance. Now, a growing number of economists and politicians argue that it’s time for a levy on trading stocks, bonds, currencies and derivatives.
U.K. Prime Minister Gordon Brown said on Nov. 7 that a transaction tax might compensate for the billions of dollars that the public has spent on bank bailouts. Government officials in France, Germany and Austria have voiced their backing. U.S. Treasury Secretary Timothy Geithner answered Brown a day later, saying the tax was not something the U.S. would support. House Speaker Nancy Pelosi, on the other hand, says the idea has “substantial currency” among congressional Democrats.
Even if political consensus on a transaction tax is lacking -- and Brown and Pelosi both say it would need to be implemented everywhere or not at all -- the idea is attracting supporters worldwide.
Just a few days ago, Paul Krugman wrote about a Tobin tax as a good strategy to tax the speculators.
Why is this a good idea? The Turner-Brown proposal is a modern version of an idea originally floated in 1972 by the late James Tobin, the Nobel-winning Yale economist. Tobin argued that currency speculation — money moving internationally to bet on fluctuations in exchange rates — was having a disruptive effect on the world economy. To reduce these disruptions, he called for a small tax on every exchange of currencies.
Such a tax would be a trivial expense for people engaged in foreign trade or long-term investment; but it would be a major disincentive for people trying to make a fast buck (or euro, or yen) by outguessing the markets over the course of a few days or weeks. It would, as Tobin said, “throw some sand in the well-greased wheels” of speculation.
While Treasury Secretary Tim Geithner tries to throw the plan under the bus, many are calling for Geithner to be thrown under a bus instead.
If the globe agrees to implement a Tobin Tax, finally we might not only be able to curb speculation on critical commodities such as oil, but be a truly progressive tax, focusing in on hedge funds and other speculative and flash trading that adds little value to the real economy.
Basically a Tobin tax is like a tax on casino hall gambling.
It is estimated such a tax could raise $76 billion dollars annually. How's that for a budget balancer?
The funds raised would be substantial: With stock and currency markets ringing up about $900 trillion in turnover each year and derivatives another $625 trillion, a tax of 0.005 percent might raise $76 billion annually.
The main issue for a Tobin tax to be successful is it must be uniform and implemented globally.
It's amazing how difficult it is to get the general public to shift that paradigm. Claims a Tobin tax is radical still abound, yet if one thinks about it, taxing a business for hiring a worker, now isn't that just a wee bit more radical?