Thoughts on a financial transaction tax?

[AGA]

A few candidates support a financial transaction tax to fund some of their proposals, such as Sanders, Warren, and surprisingly, Bloomberg. Sanders, for example, proposes a 0.5% tax on stock trades, 0.1% on bond trades, and 0.005% on derivatives. Warren proposes a 0.1% tax on all three, while Bloomberg proposes a 0.2% tax on stock trades phased in over time. Biden has floated the idea as well.

Do you support this? In my opinion, this would have too much of a negative effect on trading volume and would kill short-term trading. I think that just raising the capital gains tax would be a better option.

[Archon]

All I got to say is: taxation is theft

[RI]

A bad deal for everyone's retirement accounts.

[True Federalist (진정한 연방 주의자)]

A bad idea, mainly because the wealthy will have the easiest ability to avoid it by moving their wealth overseas.

[538Electoral]

Not good.

[Starry Eyed Jagaloon]

Not good. It means the wealthy will do their trading elsewhere and trading for the rest of us will be penalized. Setting capital gains taxes equal to income (at time of sale, not mark to market) is a better way to raise revenue and doesn't favor any sort of financial activity over another.

[AGA]

Not good. It means the wealthy will do their trading elsewhere and trading for the rest of us will be penalized. Setting capital gains taxes equal to income (at time of sale, not mark to market) is a better way to raise revenue and doesn't favor any sort of financial activity over another.

This is pretty much what happened when Sweden tried it.

[parochial boy]

As mentioned before, the voume of financial transactions is a problem as it contributes to the increasing financialisation of the economy. As in it contributes to increasing short-termism as the goal becomes immediate returns on financial instruments. But beyond that contributes to the world we live in where inflation on products exceeds the actual rate of growth in the economy. In this we not only have a gross increase in inequality based on asset ownership, but we also have the situation where the Financial Services industry no longer serves businesses, but instead, Businesses serve the Financial "services" industry. This creates all sorts of perverse incentives in business and financial decision making (share buybacks, short termism, speculation, and on and on...) which overall lead to a more fragile and slower growing economy.

So, yes, something that reduces the volume of financial transactions at the same time as raising monex for the state is going to be a good idea.

[True Federalist (진정한 연방 주의자)]

As mentioned before, the voume of financial transactions is a problem as it contributes to the increasing financialisation of the economy. As in it contributes to increasing short-termism as the goal becomes immediate returns on financial instruments. But beyond that contributes to the world we live in where inflation on products exceeds the actual rate of growth in the economy. In this we not only have a gross increase in inequality based on asset ownership, but we also have the situation where the Financial Services industry no longer serves businesses, but instead, Businesses serve the Financial "services" industry. This creates all sorts of perverse incentives in business and financial decision making (share buybacks, short termism, speculation, and on and on...) which overall lead to a more fragile and slower growing economy.

So, yes, something that reduces the volume of financial transactions at the same time as raising monex for the state is going to be a good idea.

First off, unless such a tax were implemented everywhere, it wouldn't reduce the volume, just affect where they happened. Second, when you consider the adverse effects of eliminating financial service jobs in those countries that adopt it, I doubt it would be a net fiscal gain for their governments. Third, speculation leading to stupid economic decisions goes back centuries, so blaming that on trading volumes is at best an unproven theory. (Fun fact, studies of the effect of the ban on onion futures in the Onion Futures Act of 1958, are inconclusive but several suggest that onion prices were generally more stable before onion futures were banned. The ban itself was passed because of the disruption caused when someone tried to corner the market on onion futures, so clearly better regulation was needed, but not necessarily a ban.)

[parochial boy]

As mentioned before, the voume of financial transactions is a problem as it contributes to the increasing financialisation of the economy. As in it contributes to increasing short-termism as the goal becomes immediate returns on financial instruments. But beyond that contributes to the world we live in where inflation on products exceeds the actual rate of growth in the economy. In this we not only have a gross increase in inequality based on asset ownership, but we also have the situation where the Financial Services industry no longer serves businesses, but instead, Businesses serve the Financial "services" industry. This creates all sorts of perverse incentives in business and financial decision making (share buybacks, short termism, speculation, and on and on...) which overall lead to a more fragile and slower growing economy.

So, yes, something that reduces the volume of financial transactions at the same time as raising monex for the state is going to be a good idea.

First off, unless such a tax were implemented everywhere, it wouldn't reduce the volume, just affect where they happened. Second, when you consider the adverse effects of eliminating financial service jobs in those countries that adopt it, I doubt it would be a net fiscal gain for their governments. Third, speculation leading to stupid economic decisions goes back centuries, so blaming that on trading volumes is at best an unproven theory. (Fun fact, studies of the effect of the ban on onion futures in the Onion Futures Act of 1958, are inconclusive but several suggest that onion prices were generally more stable before onion futures were banned. The ban itself was passed because of the disruption caused when someone tried to corner the market on onion futures, so clearly better regulation was needed, but not necessarily a ban.)

I'm generally minded to think that we should be moving to global rules over taxation, as the current system of taxation is generally weighted in favour of those with the highest ability to exploit it. Certainly if both the EU and US were to introduce FTT's then you would by default have a huge proportion of the global market, and huge coercive ability to pressure worldwide compliance.

And I am perfectly aware that speculation is possible even with a lower number of financial transactions - but the level of risk is inherently lower, and, as I mentioned earlier, it is a question of where the incentive lies. Obviously derivatives can and should exist because they provide a function and a service to the economy; but when the trade in financial instruments becomes and end in itself, because the returns are higher, then obviously the situation has changed.

[brucejoel99]

The issue with FTT's is that they penalize market-makers & arbitrageurs much more heavily than they penalize investors/speculators, because the former trade much more frequently than the latter & oftentimes make only pennies per trade. The problem is that these entities are actually much more important to the financial markets than laypeople realize. Without market-makers, it'd be much more difficult/expensive to buy & sell securities, & this reduction in liquidity would depress asset prices. Without arbitrageurs, derivatives would diverge from their "fair value" much more than they currently do, which would expose end users of derivatives like insurance companies to additional risk. In truth, these sorts of market participants probably do much more good for the economy than the big active investment funds that gather assets, collect hefty management fees, & underperform their benchmarks on average, or the private equity firms that load companies up with debt in an attempt to leverage marginal operational improvements into big returns.

That said, it's obviously true that hyperfinancialization in the American economy has led to stark inequality & has also probably led to some amount of lost productivity. To that end, I'd support an increase in the capital gains tax & a closing of the carried interest loophole. This would hit all market participants equally &, while it'd reduce net trading profits, the industry wouldn't be disincentivized out of existence.

[Cokeland Saxton]

This is one of the dumbest ideas I've ever heard of a candidate having.

[Stand With Israel. Crush Hamas]

It's one of those ideas, like a perpetual wealth tax, that only sounds good if you're either economically illiterate, want an economic collapse, or plan to keep people from leaving by force.

Warren and Bloomberg were likely blowing smoke to boost their progressive bona fides in the campaign. Sanders was not.

[SInNYC]

A financial transaction tax makes great sense, but as a way to discourage unproductive and harmful economic activities, not for revenue. Ideally, it would put an end to inherently corrupt and unproductive economies by eliminating day trading and the like, so that it doesn't end up getting much revenue.

For some reason its a mantra that things like 23rd derivatives and day trading are essential to a modern economy, but these do not create wealth - all they do is transfer wealth to those with the fastest connections and best (or most unscrupulous) quants. The usual argument is of course is its effect on liquidity, but liquidity existed well before the explosive growth of these activities.

[True Federalist (진정한 연방 주의자)]

A financial transaction tax makes great sense, but as a way to discourage unproductive and harmful economic activities, not for revenue. Ideally, it would put an end to inherently corrupt and unproductive economies by eliminating day trading and the like, so that it doesn't end up getting much revenue.

For some reason its a mantra that things like 23rd derivatives and day trading are essential to a modern economy, but these do not create wealth - all they do is transfer wealth to those with the fastest connections and best (or most unscrupulous) quants. The usual argument is of course is its effect on liquidity, but liquidity existed well before the explosive growth of these activities.

We already have a tax on short term trading, it's called the income tax, wherein short-term capital gains are taxed as ordinary income and long-term gains are taxed at a lower rate. Obviously, it could be tweaked to make short-term speculation even less remunerative.