Taxing the Speculators

There seems to be an effective way to raise money for public projects while at the same time reducing the amount of damage speculators can do to the real economy. It called the "transaction tax"--a sales tax on trading.

But a better explanation can be found here.

The Virtues of a Financial Transaction Tax

Easy and Fun Money

By DEAN BAKER

There is a growing movement in both the United States and around the world for taxing financial speculation. The logic is simple: even a very small tax on trades in stock, options, credit default swaps, and other derivative instruments can raise an enormous amount of revenue.

Even assuming large reductions in trading volume due to the tax, the country could still raise more than $100 billion a year in revenue or more than $1 trillion over the 10-year budget horizon. Trading costs have plummeted over the last three decades due to improvements in computer technology. Therefore, modest taxes on financial speculation, such as a 0.25 percent tax on the purchase or sale of a share of stock, would only raise trading costs back to the level of the 70s or 80s.

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