Thursday, March 01, 2012

Tax policy colloquium on 2/28/12 - my paper on financial sector taxation

This week's session of the Tax Policy Colloquium involved my own paper on financial transactions taxes and financial activities taxes.

We had a good session. But rather than comment on it here, I have simply revised the article itself to reflect the input I received (at NYU this week plus Stanford last week plus from other readers).

I've posted the revised version on SSRN, but it has not yet shown up there.

The revised abstract goes something like this:

"In both Europe and the United States, there has been much recent debate regarding whether, in response to the 2008 financial crisis, one should enact a financial transactions tax (FTT) or a financial activities tax (FAT) – commonly viewed as mutually exclusive alternatives. This article evaluates these two alternative instruments, focusing on recent proposals by the European Commission and the International Monetary Fund. It concludes that the case for enacting an FAT is considerably stronger than that for an FTT, mainly because the FAT focuses on a broad 'net' measure, rather than a narrow 'gross' measure, of financial sector activity.

"The article further concludes that a rationale for the FTT not emphasized by the European Commission – its addressing wasteful over-investment in the activity of seeking trading gains at the expense of other traders – could conceivably support its enactment, though it is uncertain that the social benefits would exceed the costs. The issues raised by this alternative rationale are independent of whether or not an FAT has been enacted. Finally, the desirability of enacting an FTT may be affected by broader political economy constraints on revenue-raising and on the pursuit of greater tax progressivity by alternative (including clearly superior) means."

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