Will the U.S. Be Seeing a Financial Transaction Tax Anytime Soon?
This month, Iowa’s soon to-be retired Senator Tom Harkin and Oregon Senator Peter DeFazio are planning to reintroduce their bill for a so-called Tobin tax. The Tobin tax is named after –wait for it—the economist who theorized it – James Tobin. In the 1970s, Tobin developed the idea for a transaction tax (amounting to less than 0.1%) on foreign currency to reduce currency speculation and reduce exchange-rate volatility. The concept of a Tobin tax gained favor during the Asian financial crisis of the late 1990s. And in the midst of the European debt crisis, many governments needing cash, and lots of debate of between Wall Street and Main Street, the Tobin tax is en vogue once again as way to both collect revenue and reduce high frequency trading. Eleven European Union countries have a draft to implement a Tobin tax at a rate of 0.1% on securities trades and 0.01% on derivatives trades. As comparison, the Harkin-DeFazio bill asks for only 0.03% for most trades.
