Reigning in Wall Street to benefit all Americans: the case for the financial transactions tax
Dean Baker, July 2016
This report makes a detailed case for a financial transactions tax (FTT) in the USA, which could raise around $105bn annually to cover the costs of free college education and help reduce income inequality.
Read the full report here
A summary of the report:
- A financial transactions tax could likely raise over $105 billion annually (0.6 percent of GDP) based on 2015 trading volume. This estimate is roughly in the middle of recent estimates that ranged from as high as $580 billion to as low as $30 billion.
- The full amount of this tax would be borne by the financial industry, and not individual holders of stock or pension funds and other institutional investors. Evidence suggests that trading volume is elastic with respect to price, meaning that any drop in trading volume resulting from the tax would reduce costs for end users by a larger amount than the tax would increase them.
- It is reasonable to believe that the industry would be no less effective in serving its productive use (allocating capital) after the tax is in place. This means that one of the primary effects of the tax would be to reduce waste in the financial sector, reducing costs while having little or no effect on its principal purpose: to allocate capital effectively.
- The revenue raised through an FTT would easily be large enough to cover the cost of free college tuition (among other social programs), although if nothing were done to stem the growth rate of college costs, it would eventually prove inadequate.