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After the Nov. 2 midterm elections, the Obama administration and Congress are going to have to scramble to fill a trillion-dollar hole in the U.S budget, and tax increases may be the only option.
A tax increase won't be good news for an already wheezing economic recovery that seems to get weaker with each new report or indicator that's issued. But the type of tax that's chosen will go a long way in determining just how much damage the U.S. economy will have to endure.
With a deficit in excess of $1 trillion, there aren't a lot of options. One possibility would be to allow the 2001 and 2003 Bush tax cuts to expire, which would have a depressing effect on the economy and most people's pocketbooks.
But a better option would be to devise some new taxes that may prove less damaging. Indeed, there's even one possibility that might even do some economic good if it's implemented correctly.
It's called a "Tobin tax."
Picking the Right Tobin-tax Rate
The Tobin tax, proposed by Nobel laureate James Tobin in 1974, would tax transactions of all types – including those in the stock market, on foreign exchanges, in the derivatives market, or even possibly in the mundane daily transfers we use to pay our bills.
Some commentators have suggested instituting a broad-based Tobin tax at a rate as high as 1%. I think that's very unlikely, since it would be hugely damaging to life in the overall economy.
Permit me to illustrate.
In the consumer economy, a tax at such a high rate would suck appreciable amounts of money out of every transaction we undertake – $3 out of a $300 grocery bill, for instance. It would also ignite a major move back to using untraceable cash – a huge boost for the illegal "black economy," and a major loss in efficiency and security (if people took to carrying their monthly paycheck around with them in $100 bills, the returns to theft would soar).
And in the face of such a high-rate Tobin tax, Wall Street would watch as the derivatives market and other key businesses were either forced offshore, or shuttered outright.
Politicians may not be all that smart, but the economists around them are not completely foolish. They are capable of seeing that the economic damage such a tax might cause would hugely exceed its yield, which in any case would be depressed by evasion. So I think a Tobin tax at such a high level is unlikely.
However, a Tobin tax at a low rate – perhaps 0.01% – is a different matter. Even if this tax were extended to all transactions in the economy, it would have only a small effect on most of us. Someone with a $70,000 after-tax income, for example, receiving pay-slips net of tax, would have total annual transactions – including credit card spending, withdrawals of cash, and other recorded actions – of less than $100,000. Thus, that consumer would pay an annual tax of no more than $10, which could be painlessly extracted by computer. (It would also be possible to exempt "retail" banking and credit-card transactions from the tax.)
The Tobin Tax Meets Wall Street
For Wall Street, however, things would be different. Most affected would be the "high-speed trading" business, which has investment banks set up powerful computers in the same building as the stock exchange.
This co-location and fast access to the "tape" of trades – coupled with some powerful computer algorithms – allows the institution to take crucial advantage of the finite speed of light and switching systems to front-run the market.
The margins on this business are very slim – as little as a penny or two a share on a $20-a-share trade. So even a 0.01% tax rate, costing 0.2 cents per share, would reduce those margins substantially.
At the same time this business is very profitable, earning Wall Street in excess of $20 billion in 2009, with the leading firm, Goldman Sachs Group Inc. (NYSE: GS), reaping perhaps $5 billion of this total. Thus, even at the aforementioned 0.01% rate, the Tobin levy would tax 10% to 20% of this profit, generating $2 billion to $4 billion in revenue all by itself.
The Tobin tax would have a similar effect on the derivatives market. The current nominal total of derivatives contracts outstanding was $542 trillion in December 2009. Since many of these are short-term in nature, we can assume that the annual trading volume is equal to least this amount, with the netting of contracts between the major houses probably increasing it further. A 0.01% Tobin tax, which would have to be imposed in all the major financial centers to catch the full flow, would thus yield about $54 billion per annum in tax revenue, of which perhaps $15 billion to $20 billion would accrue to the U.S. government.
You can see why the major banks are more afraid of a Tobin tax than of any other levy, including a tax on liabilities: It hits them directly in the nexus of their oversized trading activities. But few of these trading activities offer any benefit to the economy. In a global economy with a total output of $70 trillion, nowhere will you find $542 trillion worth of risks that need to be "hedged."
The major international banks – and Wall Street in general – are simply "rent-seeking;" that is, extracting profits out of the global economy while offering nothing in return. That's another reason to really like the Tobin tax: It would reduce the size and trading speed of both "fast-trading" and the global derivatives market, would raise revenue from this activity and reduce its volume, benefiting us all.
A Tobin tax would raise from $500 million to $1 billion from Goldman Sachs on its fast-trading activities, perhaps an additional $2 billion from its derivatives activities, and additional amounts from its foreign-exchange transactions, bond sales and other businesses – perhaps $4 billion to $5 billion in all. That money would bring about a commensurate reduction in the bonus pool that's used to reward the Goldman Sachs partners.
I'm not much of a class warrior. But if you ask me whether I'd be prepared to pay $10 a year to reduce the Goldman Sachs partners' bonus pool by $4 billion, while improving the world economy overall, I have to say I'd be happy to do so.
Wouldn't you?
Once you've also reached this realization, take the time to contact your elected representatives at both the state and federal level, and make your thoughts known.
[Editor's Note: Why is it that Money Morning's Martin Hutchinson has been right on the money with every one of his political predictions for each of the last three years?
The answer is quite simple. The same skills that made him a successful global merchant banker – where he was easily able to identify winning trends for his clients – also make him one of the very best political prognosticators.
Just look at some of his most recent global predictions. Earlier this year, just a week after Hutchinson recommended Germany, the European keystone reported much stronger-than-expected GDP. He recommended Chile back in December, and three of the stocks he highlighted have posted strong, double-digit returns – and one is up nearly 25%. He again recommended Korea – which analysts were downgrading – only to have the traditionally conservative International Monetary Fund (IMF) come out with an upgraded forecast that projects solid growth for that Asian Tiger for this year and next.
A longtime international merchant banker, Hutchinson has a nose for profits instincts – as evidenced by his unerring ability to paint a picture of what's to come. He's able to show investors the big profit opportunities that are still over the horizon – while also warning us about the potentially ruinous pitfalls hidden just around the corner.
With his "Alpha Bulldog" investing strategy – the crux of his Permanent Wealth Investor advisory service – Hutchinson puts those global-investing instincts to good use. He's managed to combine dividends, gold and growth into a winning, but low-risk formula that has developed eye-popping returns for subscribers.
Take a moment to find out more about "Alpha-Bulldog" stocks and The Permanent Wealth Investor by just clicking here. You'll find the time well spent.]
News and Related Story Links:
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The Tobin Tax: The Fix-It Plan Wall Street Hates … But Can't Seem to Kill - BusinessDictionary.com:
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Sounds great, but Mr. Hutchinson obviously does not understand how politicians behave.
They may start with this .01% tax rate, but it will NEVER stay that low.
Tax everyday transactions? It is not as easy to implement operationally he blithely asserts. How many small businesses have you run, Mr. Hutchinson? I assure you, you would not have the same attitude.
Restrict the tax to the type of behavior you want to discourage; e.g., high-volume fast trading and derivatives – that makes sense. Taxing the general public does not.
I also disagree with this statement " tax increases may be the only option". Addressing the spending side of government is a far better option. Of course, we need a fiscally conservative messiah to be elected president and give him or her a Congress filled with a majority of sensible, honest representatives. Not much chance of that.
No tax is a good tax, however, when you have broad-based tax that has a well-known tax rate and is obvious to all in their day-to-day transactions, politicians will have no choice but to make all aware if they are going to raise the rate. To do this they then have to do it at their own peril.
I am Australian and we have experienced all versions of tax but we seem to be prospering at the moment, so may I be bold enough to suggest two things: to reduce your deficit reduce your spending, or if you must introduce taxes, introduce a tax that does not distort the efficient allocation of resources, and the Tobin-tax seems to be a suitable tax.
Stimulation packages are fine as long as they are of such size that they can be manageable and easily repaid. Not make them so big that you end up not knowing where the money is going and leaves you with sleepness nights of working out how to repay it.
To us the US seems to be looking down the barrel of a very large gun.
Cut spending.
How many trillions in debt have we that this really makes a difference? Where does this Tobin Tax near 1 trillion?
Sure, a Tobin tax sounds great, and I am sure that it might start out with a low rate, but we are dealing with greedy politicians here. What would keep them from raising the tax rate over and over again just as they have done in the past?
This is a small price to pay to reduce the deficit. I'm one of the few who are actually willing to pay additional tax to reduce that. The problem is there is no way the government will use 100% of that extra money to pay down the debt. Additional pork barrel spending is the eventual result. Anyone who feels that Goldman Sacks will personally asorb a $5billion loss is nuts. Guess who will eventually end up paying that? I guarantee you it won't be the top of Goldman Sacks or any other financial institution that can pass that expense on to its clients. The lowly consumer never wins. We have got to stop this madness.
Why wouldn't everybody go offshore? Shouldn't places like Singapore, Dubai and Panama be thankful for that ta?
Brazil had a tax like "The Tobin Tax" until President Lula government. It was 0.38% on all financial transactions.
well martin, if you think for a minute that the tax levying powers that be will institute your suggestion and then stop at whatever percentage they start with, you are sadly mistaken. it won't be long before they are getting the lion's share of everything. you are either an ignorant fool, a liar, or a jackass. which is it? there is ONLY ONE tax that should be on the table, or ever should have been on the table, and that's a TAX ON ALL IMPORTS. had we stuck with that, we would still be where we were before we deviated. ON TOP. don't feel too bad, Tobin is also one of the above three choices. the best thing that could happen to humanity as a whole is if we were to wake up tomorrow and the entire political subspecies had somehow vanished overnight along with ALL the shills.
Submitting high-speed trading to the Tobin-tax maybe useful. But no way to extend it to paying our bills or credit card transactions, that is pure non-sense.
Forget about any transaction tax on non-financial institutions, let alone indivicuals, it would be highly counter-productive.
Martin –
I was really disappointed to read this article. It does not matter in what form additional taxes occur, because in any form excessive taxation reduces revenues to the treasury. Take a look at the Laffer Curve to gain an understanding, and then take a look at how revenues to the treasury increased subsequent to the Kennedy tax cuts, the Reagan tax cuts, and then the Bush tax cuts. The only proven, short-term solution to our economic woes is to cut taxes, and the only long-term solution is to reduce governtment spending. This has nothing to do with class warfare. It has everything to do with common sense.
– Alan
The Tobin tax, like all business taxes will be paid in a mix of employees in lower salaries, stock holders in lower profits/dividends and the final consumer in higher prices. Since employees and stock holders are also consumers, in the end all business taxes a finally paid by the final consumer, A-men.
Action to take: for "Real Tax" reform. First get to understand and then support the FairTax bill HR25. A 133 pay bill you can read online. Visit http://www.fairtax. org.
The FairTax offers a broad range of solutions to many existing issues.
* Stops punishing good behavior like income, profits, savings and rewarding bad behavior like debt; opposite of present tax code
* Raises the same $$$ tax revenue as 67,500 pages of code with a simple and transparent consumption tax
* Get your whole paycheck without federal withholding and tax fillings
* Taxes the under ground economy; including illegal aliens, drug dealers and present evaders to add $1 to 1.5 trillion to tax base
* Takes hidden taxes, $.23 in ever dollar of purchase, out of the pricing system to lower prices and improve US exports
* Will create jobs, stimulate GDP 10% and attract $10 plus trillion in offshore capital to US with a "no cost" change in tax code
* Dramatically lowers middle and lower income effective tax rates
* Be able to earn, save and invest freely without tax; but be taxed on consumption as you enjoy and spend your wealth
* Greatly reduces political power to use tax code to reward and punish, divide and conquer…and hide and deceive.
I await your reply, 904-735-7565, Paul Livingston
The FairTax would be the best tax. It puts the citizens in charge of
the government.
The Tobin tax sounds like a "foot in the door" tax to me. 0.01 % today and ?.??% tax down the road. I believe federal income tax started out this way. I think a better solution would be a flat tax. This would save billions just by putting a plethora of IRS drones back on the street.
There is a sweet and compelling reasonableness to this Tobin Tax, seennon the way it
generates most of it's revenue from high-speed computerized
transactions that the.vast majority don't participate in. The other plus
is negligable impact on the overall economy and a worthwhile disincentive
to the robber trading banks.
Nonsence! There is no such thing as a good tax.
Remember, "Only People Pay". All this tax would be downloaded to the consumer through cost increases and only a fool would seriously believe, even at you rediculuous 0.01%, that the government, when the tax is inacted, will not tie it to inflation and create an ever esclating tax.
The only solution is to cut government which is about as likely as honest lawyers.
I will gladly pay usd 20/year to reduce wall street manipulation= 0,02% tobin tax
The Tobin Tax sounds reasonable….but, why not just eliminate the IRS and pass H.R. 25, the transparent retail sales tax? It would be revenue neutral…plus, the estimated 14 trillion dollars being held offshore (by individuals and companies) in order to avoid the income tax could flow back into this country in PRIVATE hands….creating jobs, etc., the recession is over!
H.R. 25 has 60 or more co-sponsors the House and Senate. More people need to know about it…
Hmm. Jim, you said a transparent sales tax would bring offshore funds back into the States so they could be taxed. But most of these funds are not actively spent. Will the sales tax apply to brokerage fees and commissions? Only then would these offshore funds be likely to be taxed if they were returned home–and if we had a sales on on transactions such as those, it would need to be small or funds would still stay offshore to avoid it…
The problem with the Tobin tax is that it imparts yet another way for the government and its controllers to extract energy from the system without cleaning up their acts of deception.
The FairTax plan first demands that the income tax be repealed and the IRS disbanded, and all overhead costs of government be placed onto a single sales tax at retail level. The prebate included in the FairTax makes it progressive.
I think much more thought has gone into the FairTax (http://www.fairtax.org) than the Tobin tax, which is a reactionary idea that doesn't take any real political risk.
Here's an idea. Actually prosecute Goldman for their illegal activities, cut the budget with a meat axe, and stop the government from engaging in all its extra-constitutional activities.
I get the point re: flash trading. But aren't you basing you revenue projections for the tax on the assumption that they'll continue to flash trade…the very behavior you hope to change via the tax?
You English always have a statist answer.
My answer is to re-institute honest accounting standards, get rid of the FED, and let Goldman and the rest of their vampire squid cousins fail in the next round of the great credit revulsion. As for getting the F.U.S. government more money, are you kidding? I don't want to be an enabler of the kind of behavior they engage in any more than i would be an enabler of a whiskey bum or a wife beater.
ARE YOU NUTS. NO NEW TAXES….NOT THE TOBIN TAX OR ANYTHING. NADA. CUT SPENDING, INSTEAD. Every time Congress gets to write a new tax —or even amend an old one—they go "hog wild and pig crazy". There will be no such thing as just a nice, quite 0.01% Tobin Tax when Congress gets their greedy fingers in the mix. First, they will fill the legislation with billions in "pork" and then add even more billions as they succunb to the seduction of special interests, such as unions and other lobbyists. The result will be: the percentage will need to be some outlandish number —say 0.25% or even(gasp) 1.0 %—to pay for they mess they just created. NO NEW TAXES. Send Congress home now and save billions and even trillions. We have more than enough laws.
I would be happy to pay $ 20 in return of 10 billion from G&S.
I am not an economist and didn't know about the Tobin Tax but have been thinking forever that these trades don't generate wealth but only transfer wealth from one pocket into another. I would introduce a 50% speculation tax or more on all stocks which are being sold within 6 months of buying.
Worse:!
These "profits" remove money from where it serves best, in circulation, and puts it into some "warehouse" only to be used to further damage the national economy.
But here is my question:
After the Tobin Tax apparently has been around for some 35 years WHY is it not introduced with such multiple benefits?
Did Germany not introduce something along that line recently?
Dieter
What is needed is a "rationalization" of our defense spending, currently at over $900 billion per year, wasted on unethical religous wars, yet unable to secure our southern border.
I submit a defense spending of $400 billion is adequate for our safety, and we could even secure our borders for that.
It's just a crazy thought, but why not implement a very small tax on the roughly 48% of fellow americans who do not pay any tax. I think it's about time that this welfare mindset was slowed down. Dr. J
I think your idea of a Tobin Tax, or any new tax, is a terrible idea. You say that a small one would have very little impact. However, I have been around for over 70 years and have never seen a small tax that didn't become a larger tax. For example, think about income taxes, Social Security tax, and Medicare tax. Yes there are peaks and valleys on all of them but in general they all go up. Any time a taxing agency, some times called fees, gets its foot in the door there is no getting rid of them. Over time they all go up and up and up, no matter what lies the politicians tell us. On top of that they find ways to use the money in ways that were never originally intended. Again look at Social Security.
I agree totally with the main purpose of the Tobin Tax–that it would probably reduce the Wall Street rent-seeking. As you stated, this is an activity that has absolutely zero economic benefit or function (other than increasing the bonus pool of the derivatives houses). And it would be totally painless, because these activities are not raising entrepreneurial capital for our businesses on Main Street. And one other benefit might accrue: Individuals would be a little less likely to want to make day-trading a career and actually think like investors.
If you want to target a tax toward Wall Street, fine. But the problem with a Tobin Tax is that you know as well as I that it would never stay at 0.01%. Before you know it, it would become a European style 12% GST.
As further evidence that the Tobin tax would become a GST, note that Tobin originally proposed the transaction tax as on currency conversions, only. Then it became a tax on financial transactions. (see en.wikipedia.org/wiki/Tobin_tax). Now, you're talking about applying it to grocery bills!
Obviously, the excesses of government have to be reduced. The Tobin tax appears to be the least painful of the options I have heard. Letting the Bush tax cuts expire would be one of the most harmful, and inequitable events in any recovery. The article does not address whether an estimate has been made regarding how much of the trillion dollar deficit will be reduced. Is Martin implying that the Tobin tax will accomplish all or most of the deficit?
Very interesting concept.
I've read that allowing the Bush tax cuts to expire will result in $3.8 trillion in lost tax revenue over the next 10 years, while extending them for those who make less than $200k ($250k for couples) and letting them expire for those making more – who allegedly make up only 2% of all taxpayers – will result in $3.1 trillion in lost revenue over that same time period (however, that's $3.1 trillion in people's pockets that can then go back into the economy).
A 0.01% Tobin tax would generate $540 billion from the derivatives market alone over 10 years (using the Dec. 2009 total for simplicity; hopefully that market would expand over time), plus, if I understand the article correctly, a similar amount from other fast-trading and foreign exchange activities (assuming other banks have a similar proportion of their activities in each of these areas as Goldman Sachs, and also assuming no growth or contraction over time). If that's correct, the Tobin tax revenue by itself would be 1.5x the amount the government would get by re-imposing the pre-Bush tax rates on the top income earners alone.
The beauty of this is that it seems to penalize greed instead of penalizing income. I don't necessarily have a problem with greed, but seeing as how it was the banks' greed that got us into this mess, it'd be nice to come up with a way to ever-so-slightly tax such greed – and thus make the banks pay in advance for their own eventual bailouts (as well as the greater good, within reason) – rather than restrict or eliminate financial innovation completely.
Sounds like a win-win.
Correct, but only as far as it goes.
And very,very dangerous!
The danger is in instituting it in the first place, allowing a money hungry congress to let another camel get his nose under the edge of the taxpayers' tents.
Rememeber, or go look up, how the progressive income tax and social security taxes started out at seemingly insignificantly low rates so that anyone who foresaw the potential end result and complained was ridiculed as a "Chicken Little!"
We need to have congress responsibly reduce spending, attacking even the so called "untouchable entitlements" and fix medicare, medicaid and social security so they are no longer the makers of inevitable bankruptcy.
Lou Schroeder
Greenwood Village, Colorado
I agree with a tax on useless financial transactions that could be deemed a "public bad." As a result, there is no need to tax the average citizen on daily transactions as there is adequate reason to try to quell useless (and possibly destructive!) financial transactions alone.
The "Tobin Tax" at low rate (such as .01%) and targeted on certain financial transactkons would not only raise needed revenue but would also dampen abusive stock and derivatives trading. If there were such a thing as a "good tax", this is it.
you dummies just don't get it the only way to cut the deficeit is for the government to cut its own throat and (STOP SPENDING!!!!!!!!!!!!!!!!) Any additional tax only feeds the beast and it gets bigger and more wasteful!!!!!!!!!!!!!!!!
I'm surprised the author does not mention the proposed bill H.R. 4191, currently referred to committee, which proposes to do pretty much what he outlines above, except only on financial trading transactions. For very good information and links on the worldwide support (and non-support) of the proposed tax, see http://freerisk.org/wiki/index.php/Tobin_tax
Nor does the author mention the fact that Britain's Gordon Brown suggested a Tobin Tax at the G-20 meeting, only to be ridiculed by Timothy Geithner (gee- former Goldman Sachs exec, lots of friends still there, ya think?). See following article for more: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=azjQyQb5PAH0
Are you kidding? At a 0.01% Tobin tax rate we are talking about a few billion here and there in collected tax revenue when our national deficit is in the trillions of dollars – barely a dent! I for one do not feel responsible for our government's fiscal irresponsibility, nor for the consequences related to Wall Street's excesses. Save the general public from this tax but go ahead and tax Wall Street's derivatives market, it is after all a sale transaction. Now on the other hand, if you were to say that the Tobin Tax were to fund our national healthcare bill, or our soon-to-be defunct social security, then I would say ok to taxing wall street and I would be happy to pay the $10 as well. But let us not forget our government's role in overspending and place a cap on entitlement programs as a ratio to GDP – any new revenue based on taxes only validates the government's current wasteful spending and wasteful policies and only encourages the politicians to look for more ways to spend the additional revenue.
america has more people not paying tax than any country in the world drug dealers and illegal imigrants working send uncountable amounts of money out of amerca the only tax to get them is a consumption tax thank you frank
A tobin tax can only make sense if every country adopts it.
The only tax that can save America is The Fair Tax. You know this is true so don't act like our politicians and ignore the truth.
Shut down the IRS, abolish the 16th ammendment, finally tax the underground economy and fund the Fed budget, SS and Medicare, abolish all Estate taxes, Capital Gain taxes. Tax changes thereafter must be put to a public vote and must meet a 2/3 majority to be law. Rebates to those below poverty level … THAT'S FAIR TAX. After seasoning current inventories, America should save some 20% overall in taxes paid.
The Tobin tax is the wrong way to go but there is no ideal solution. To pay for all the entitlements, including Obamacare, requires a 2 pronged approach. Reduce the entitlement payments by raising the bar of qualification. For instance, that would mean increasing the age to qualify for social security payments and putting more stringent limits based on income to qualify for medicare. Secondly, a national sales tax similar to the VAT/GST that exists in other countries. These measures may be politically suicidal but are necessary.
The Tobin tax: what an awesome idea, finally a tax that actually would hit those that can usually dodge anything, but it doesn't really hit the little guy. For these two reasons alone they probably won't bring it on.
The right Tobin Tax is 0.00%. The right name for this monstrosity is the Total Tax. It starts the same way as Woodrow Wilson's Income Tax and ends as the income tax with rates actually over 100% in some countries.
Fifty years ago an economist took a car and subtracted ALL the taxes paid to everyone contributing to getting that car from the actual source of everything that went int it. He also removed (in his calculations) everyone elses taxes in the entire world. Then he reduced the cost of everything that all the woorkers paid for the things they need to live. The final, totally tax free cost of the car turned out to be ten percent of the original price.
That is right! Fifty years ago a totally tax free car, made entirely by untaxed workers living on untaxed land was ninety percent tax.
What is needed is to go after the other side of the equation: GET RID OF WASTE, FRAUD, EAR MARKS, PORK BARREL, ENTITLEMENTS — return to the pre-Wilson era of "all direct taxes will be laid according to the census" abd our country will finally be back on the RIGHT road.
Excellent idea Mr Hutchinson, I completely agree with you. A great way to tax their highly damaging financial shenanegans. Whether we will ever see it implemented is the burning question.
If you want to curtail high frequency trading, put the small tax on only those transactions exceeding $500,000 indexed for inflation and made by financial institutions and not individuals.
I'm not in favor of any new taxes because politicians will always think they can expand the tax to affect everyone else. If you put a tax on my life savings on my retirement account every time I sell stock or move my money, I will not be very happy. I'd likely put it all into money market funds and leave it there for years. If everyone else does like me, the stock market could crash. I guess that would make a few people happy. I won't have as much money for retirement either unless we are in a multi-year bear market. At a minimum retirement accounts and individuals who are not millionaires should be excluded in my opinion. That is not where the big money is at anyway unless you just want a big broad new tax and I'm not in favor of that.
One of the major reasons for our economic woes is that we have allowed countries to compete in our markets that use slave labor and no environmental controls. To boost our manufacturing, our employment, and to help pay the debt, taxes should be levied on the products of those countries to make up for this unfair advantage.
The goods from companies that have fled our country to avoid taxes and the cost of decent living standards should also be taxed heavily. We should bring back the rules that require corporations to show that they have benefited American citizens before their charters are renewed (remember that corporations get large tax breaks which is basically money out of our pockets).
Also, we need to dissolve the private Federal Reserve. This is a private corporation that creates our money and then loans it to us with interest. Guess what…there is no way to pay the debt with interest without getting more money from the Federal Reserve at interest. What a scam!! The constitution gives the power to Congress to print the money. Unless they take back this power, we will never be out of debt.
The analysis of this tax is horrible. It would be very destructive to Wall Street. I do not day trade, but I actively manage my investments. If I think the market is headed down for awhile, I might buy several thousand shares of SDS or something similar. When I think the market is due to go up, I will reinvest that in long positions. It is not unusual for me to trade 40-50 times my annual income. This is not an inconsequential tax for active investors.
Solutions are obvious and cutting spending and increasing taxes on speculative and costly personal preferences like smoking are helpful. What is needed is a broad based plan that doesn't hurt those who are most vulnerable. We need a complete re-do and bring the Fed under the Treasury so we get interest payments — not the banking cartel aka The Federal Reserve. All of this depends on a resolute congress with ethics and the courage to turn away from K Street.
What chance do we have unless we invite Professor Guillotine to return from the dead and install a device on Capital Hill?
Since the Big Wall Street Banksters own our current Governement, a tax that will effect the banksters is very unlikely. Just llok at the neutralization and sanitation of the recent Financial reform Bill as proof.
What started with good intentions finished with more restrictions on the little guy, and more power to the Feds (which is the fox guarding the hen house), and the relaxation of limits (without consequences) for the banksters.
If the Tobin Tax were initiated, any burden would be passed down to the guy on the street anyway, and if a Tax protected the little guy and hit Wall Street as intended, it would never pass muster.
History is solid proof of that.
Its all smoke and mirrors.
New taxes lead to new spending. The Social Security overhaul that was to "save" Social Security hasn't done a thing–the revenues meant for SS are being spent elsewhere to "reduce the budget deficit" This just makes a bigger deficit down the road. We don't even know the true deficit–too many things are labeled "off budget" and not counted! Everyone is lying and hiding, and we let them get away with it.
For those who like the "Fair tax" and think a national sales tax without all the other taxes would be the best bet because it would (among other things) cut out the IRS, have you talked to state governments with sales taxes? They have infrastructure to collect those taxes and complain that plenty of revenues end up underground and not collected. Only a few states collect only a sales tax–most have both income and sales taxes.
Cutting spending is the only way to reduce the deficit–but at this stage it will be almost impossible to do because we have so many IOU's that interest on those IOUs take a large part of our taxes. We must cut the deficit to zero and pay down debt. But how can we do that?? Social Security (I am 66 and my mother is 85), Medicaid (used by a lot of elderly people as well as those getting on their feet.) Medicare that has effectively been expanded to everyone with national health insurance…We paid special taxes for SS and Medicare, but those taxes were spent elsewhere. Now we are older and need that income/benefit but the funds are not there.
It will never take place as the adoption of Tobin tax as regards the financial operations
means the dramatic change of the whole economic order in USA.
Guess what will happen with a tax like this: only the people will pay and dearly for it. The large firms will receive their exemptions from the tax like in the UK, or merely pass it down to the rest of us. The tax revenues will be hugely disappointing so expect it to increase to 2% as Sweden did when they attempted this tax for only 6 disastrous years. The bid-ask spread will cost us multiples more than the tax itself as traders leave the markets and only the big firms are left to gouge us.
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