Tweet
(photo: MCS@flickr/flickr)
In a blogpost discussing the push by many groups to get a financial transactions tax the Post told readers:
The White House believes it would be easy to evade, could hamper economic growth, and might make markets more volatile, not less so. Instead, Obama has proposed a new “financial crisis responsibility fee” on big banks, which would raise about $61 billion.
While it is not clear how the Post knows what the White House really believes, what we know is that financial transactions taxes are apparently not that easy to evade. The tax in the UK, which applies only to stocks (not derivative instruments like credit default swaps, options, and futures) raises between 0.2 and 0.3 percent of GDP annually. This would be between $30-$45 billion a year in the United States. Unless we assume that the Obama administration thinks our tax collectors are much less competent than those in the UK, then they presumably do not really “believe” that the tax will be easy to evade.
The reference to economic growth refers to outdated research by the European Commission (EC). The most recent study by the EC (sorry, no link) shows that a tax would lead to somewhat more rapid growth if the money was used either to reduce other taxes or finance public investment.
If the White House has any evidence that the tax would increase volatility they are keeping it secret from the world. The tax would simply raise transactions costs back to where they were 10-15 years ago. Financial markets were not obviously more volatile in 1995 than they are today.
Finally, the “financial crisis responsibility fee” proposed by the Obama administration would raise an order of magnitude less tax revenue than the financial transactions taxes of the size generally being proposed. The Obama administration surely understands that they are pushing a tax that will have much less impact on the financial sector and will raise much less revenue than a financial transactions taxes.
The Post does not know what the White House “believes” about financial transactions taxes. It knows what it says about financial transactions taxes. While what it says may reflect what it believes, it may also reflect the fact that the administration is hoping to raise money for its re-election campaign from Wall Street. Also, many officials in the administration may hope to work on Wall Street after leaving the administration. These are the facts that we know.
###
Economist Dean Baker is co-founder of Center for Economic Policy and Research and writes regularly on CEPR’s Beat the Press blog, where this post first appeared.
9 Comments
Bottomline is that the tax that that France and the Nurses Union is proposing threatens the dominance of London and Wall Street in the financial world and they don’t want that to happen.
Why anyone doesn’t see Obama for the whore he is is beyond me.
Thanks and recommended.
With the amount of money he gets from the Banksters, Big Energy, Big Pharma, and the War Machine for betraying the 99%, Obama has certainly earned the designation of prostitute rather than the more commonplace “whore”. He’s probably got Milton Friedman’s ashes in an urn on the mantle.
Is it possible that WaPo knows what the O administration believes because the O administration told it? After all, O told the WaPo editorial board that he intended to destroy SS. It isn’t as if there’s been a firewall between these institutions.
It’s a sales tax. Not different from any other tax. Harder to evade than the sales tax you might pay on the purchase of food if your state taxes such purchases. Not taxing these sales transactions while taxing other sales transactions strikes me as a violation of the 14th Amendment but I’m a bit of a 14th amendment ‘purist’. I sell something [anything] in some states and there’s a tax on the transaction paid by either the purchaser or vendor. It’s simple, very simple, to call it ‘complicated’ is a lie. Certainly less complicated than derivatives or losing a couple of billion gambling err I mean ‘speculating’. Purely ‘financial’ transactions produce no thing of value unlike most other economic activities. Indeed it appears that Wall street merely destroys things for the cash.
…X2
A financial transaction tax has been tried previously and failed. It will destroy liquidity in the markets and drive additional jobs overseas. Stupid idea.
Please no personal attacks on MyFDL. -MyFDL Editor
Please no personal attacks on MyFDL. -MyFDL Editor