I have just posted on SSRN a new article draft that I co-authored with Douglas Shackelford and Joel Slemrod. It's entitled "Taxation and the Financial Sector." I will be presenting it at the National Tax Association Annual Meeting in Washington on Friday, May 14, and later this year a final version will appear in the National Tax Journal. Co-authoring, which I don't often do, was a good experience despite the incentive issues that may arise in all quarters (mine included) from such an enterprise.
Anyone who's interested can download it here.
The abstract is as follows:
In the aftermath of the recent financial crisis, a variety of taxes on financial institutions have been proposed or enacted. These taxes’ justifications range from punishing those deemed to have caused or unduly profited from the crisis, to addressing the budgetary costs of the crisis, to better aligning banks’ and bank executives’ incentives in light of the broader social costs and benefits of their actions. Although there is a long-standing literature on corrective, or Pigouvian, taxation, most of it has been applied to environmental externalities, and the externalities that arise from the actions of financial institution are structurally different. This paper reviews the justifications for special taxes on financial institutions, and addresses what kinds of taxes are most likely to achieve the various stated objectives, which often are in conflict. It then critically assesses the principal such taxes that have been proposed or enacted to date: financial transactions taxes, bonus taxes, and taxes on firms in the financial sector that apply based on size, bank liabilities, or excess profits.