Dark Veil Around Financial Tax Trade

Some legislative proposals just won’t be approved no matter how beneficial they are. One of them is the financial transaction tax proposal, which allows an extremely small levy on every sale of stocks or bonds. James Tobin, a Nobel economist, proposed this in 1972 to impose minimal taxes on currency transactions.

The so-called Tobin tax has been brought up again as a response to bank speculation. Proponents maintain that such move on taxes would keep speculation at bay. This could be beneficial to the stock market, which has been seemingly superseded by high frequency program trading. Financial transaction taxes can provide revenue amounting to 40 billion dollars a year.

Senator Thomas Harkin and Representative Peter DeFazio reintroduced the bill, which would require 3 cents of tax per $100 of stock and bond trades. Rep. Keith Ellison has somewhat similar bill, which proposes a tax of 0.5% on stock trades—this is significantly bigger than Harkin’s and DeFazio’s proposed bill. Neither seems to be getting favors in the congress.

Things are different in Europe, as Germany, France, and nine other EU members have agreed to impose taxes on stock, bond trades, and derivatives. Cynics weren’t able to thwart the passing of the bill, and this is what the European commissioner Algirdas Semeta bragged during the February meeting in Washington. However, Europe’s financial industry is seriously against imposing taxes on financial trade and is working to impale the proposal.

In May, Reuters reported that clandestine talks have reduced taxes from 10 basis points to 1 basis point for stocks and delayed the effective implementation date—in fact, implementation shall come in phases.