Rave

Financial Transaction Tax for Eu?

Posted 14 months ago|3 comments|578 views

Banks and Wall Street Should Help

TAGS

Eu Parliament OK's FTT , Tobin Tax in Europe , Financial Transaction Tax , Best Way to Raise Revenue

Written by

Altruist
Eugene, OR

The Stock Market plunged today partly on the basis of Spain's credit rating being downgraded. This fed fears that Europe's debt crisis could worsen.

There was other news that might have reassured the markets. Europe has taken a giant step towards handling its debt crisis.

On March 8, the European Parliament voted 360-299 in favor of introducing financial transactions taxes.

I am certain all of the right wing readers are saying to themselves, Sure all them Europeans are tax and spend socialists, that what they do.

The right wing hates taxes. They claim that taxes are a disincentive to work, and harms investments. They think that individuals could use that money in better ways than the government could. They think all taxes are evil.

They are wrong. Some taxes are good. When tobacco taxes pay for medical care and also as an added bonus discourage smoking which in turn decreases medical costs, It does far more good than bad.

The Financial Transaction Tax is one of those Good Taxes. For one thing it has nothing to do with the free market system. The transaction tax is so tiny (.05%) that it would not discourage investment or the purchase of anything. Regular people would not even notice it when they buy their food or fill up their car. The Financial Transaction tax is designed to discourage the type of harmful behavior that caused the worldwide economy to crash. It would force speculators who leverage their gambling to put some "Skin in the Game".
http://www.marketoracle.co.uk/Article177...

The UK's Report on Innovative Financing said that "By placing an FTT, we can curb speculation and stabilize markets, we can create incentives for long-term investments, we can put an audit trail on every transaction and thus re-enforce transparency and we can make the financial actors assume their fair share for the cost of the crisis."

The FTT will generate about $200 billion annually which is double the entire EU budget and will go towards creating jobs and other critical services.
http://www.ips-dc.org/blog/europe_takes_...

The Financial Transaction Tax would be most efficient if all of the major nations in the world had the same tax. The United States also has major debt problems and is in danger of having the same financial collapse we had before because the same players are doing the same risky gambling. When we are talking about firing teachers and taking food out of the mouths of babies, why isn't anyone talking about a FTT here in America?

EMAIL|FLAG THIS POST

To:

From:

COMMENTS

3 comments|ADD A COMMENT|JUMP TO MOST RECENT

xlong

14 months ago: The United States does not have and never will have an FTT because if they did the exchanges would leave the country, on the one hand it is said that the tax is tiny on the other hand its said it will generate 200 billion annually.

The supporters of a Financial Transactions Tax are so stupid even the ones
who are doing so out of the worthwhile motivation of trying to rein in
harmful unregulated financial activity do not realise that the Tobin Tax
specifically targets the CURE and the FUNCTIONING MARKETS, rather than
the problem and the problematic markets.

The problem is mispricing and illiquidity. The solution is effective,
continuous repricing, which is accomplished through high frequency
trading. When that happens, people do not accumulate massive positions
whose value is suddenly repriced: the repricing occurs continually;
those markets will have already responded dynamically.

The Tobin Tax specifically penalises markets that reprice in a timely fashion.

If intervention is needed, it is needed to address those markets
which DON'T turn over a high rate of transactions – those markets where
the price discovery mechanism is opaque rather than transparently
continuous and automatic.

Imagine if the illiquid market in mortgage derivatives had been
subject to the kind of high turnover, high liquidity trading that we see
in the currency markets. Those instruments would have been repriced far
earlier, far more efficiently.

Look at the pound: the market has been giving feedback for a while,
has been sending distress signals, deterring overinvestment in the pound
and demanding action. If the value of the pound had been unresponsive
to fundamentals of our crazy public finances, if it had stayed high,
then people would have continued to overallocate into the pound and the
fundamentals would have continued to deteriorate until the wheels fell
off, a la what happened with mortgage derivatives.

FLAG THIS COMMENT

xlong

14 months ago: If a financially literate Intelligent Being had been asked to devise a
fiscal or regulatory response to the credit crisis that was most
specifically designed to damage the system, to cut away the meat, to
leave the rotten aspects alone, to alienate the cure and to increase the
chances of problems in the future, a Tobin Tax would have been the
precise answer.

This tax would triple Britains contribution the EU,well it would have but the fact is smart money will move offshore leaving the small investors and traders to pick up the bill, the amount liable to tax per year would drop and revenue will be lost.

The asian markets will never have this tax they have quite rightly called it unfair but they will happily take the business out of our hands.

This is disastrous only for the man on the street, he cant change his location quite as easily as the market players.

FLAG THIS COMMENT

Altruist
Eugene, OR

14 months ago: Sounds like you have a dog in the fight.

If as you say the problem is with miss-pricing and liquidity who is to determine the correct prices and decrease liquidity? The bankers and Wall Street just about had a cow because Congress put minimal controls on their ability to screw the consumer, but wouldn't allow any real controls on this type of speculation which is harmful.

If Europe goes ahead with this plan and instates the FTT it will be a good economic experiment. Most of this trading takes place in the US. If people move their trading out of the EU and trades even more here and in Asia will it help or hurt the economies of these nations? I suspect the rich will just get richer and the poor will become poorer.

I think that the transaction tax should be expanded to include ALL transactions not just the risky speculation.

This should satisfy all of the conservatives who are always railing for a flat tax. Studies indicate that if the Transaction tax were to increase to .2% the revenue generated could take the place of all of our Income Taxes. One big added advantage is simplicity. The nation spends billions hiring tax consultants to try to make sense out of our complex income tax law.

A transaction tax could be instated easily and almost immediately by all banks and financial institutions, simply making this small fee every time any money is transferred from one place to another. No one would need to file anything, it would all be done automatically.

FLAG THIS COMMENT