Saturday, October 1, 2011

The "Robin Hood" Tax

There has not been very much discussion of the European Commission's proposed "Robin Hood" tax on financial transactions on this side of the Atlantic, probably because it is seen as a dead issue here. Both Democrats and Republicans are far too deep in the pockets of big finance to even give the idea a hearing. Nevertheless, it deserves some attention, especially if it can be tweaked a little to address a problem we've seen a lot of lately: excessive volatility in the markets.

The heart of the European plan is a .01% tax on all financial transactions, including stocks, bonds, derivatives, and other financial instruments. Although only one one-hundreth of a percent, it is estimated that the tax would raise €210 billion annually to support the European Union.

So what's the tweak I'd suggest for the USofA? Simple. Do not tax the sale of an asset if it has been held for more than one month. Tax it at .005% if it has been held for at least one day, and tax it at .015% if it has been held for any shorter period of time. This would put the greatest burden on program (aka "high frequency") traders, who may make as many as 10,000 trades per minute, and would reward longer-term investments. Long-term investment — the kind used to finance real economic growth — is the kind of investment the United States needs right now.

I have no idea how much money this plan might generate, but I know for certain that it would royally piss off the big investment bankers, hedge fund managers, and anybody else bailed out by the taxpayers in 2008. Most Americans would get a good deal of satisfaction from that outcome alone, but, more important, getting big finance to repay taxpayers for their 2008 largesse also would be a form of justice.

Hey, Obama! Looking for another populist ploy for your 2012 re-election bid? Try it.

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