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Home Publications Blogs Beat the Press Latest Word on Financial Speculation Taxes: The WSJ Has Never Heard of the London Stock Exchange

Latest Word on Financial Speculation Taxes: The WSJ Has Never Heard of the London Stock Exchange

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Friday, 04 November 2011 17:33

In case you were wondering how the Wall Street Journal managed to miss the $8 trillion housing bubble that sank the economy, we now know the answer, the WSJ apparently can't find out even basic facts about the world. It doesn't even know about the London Stock Exchange. It ran an editorial today railing against plans by the European Union to impose a financial transactions tax.

The editorial told readers that:

"The main reason the scheme hasn't been enacted anywhere is that even a small tax on every financial transaction would drive business someplace else unless everyone was in it together. The Europeans, who have been toying with imposing a transaction tax of 0.1% on securities and 0.01% on derivatives, estimate that such a move could wipe out 90% of derivatives trading in Europe and cost the British economy and its Treasury tens of billions of pounds a year."

If the WSJ had heard of the London Stock Exchange they would know that it has a 0.5 percent tax on stock trades. Contrary to the WSJ's claim that even a small tax would wipe out the market, the London market remains one of the largest in the world. The UK raises between 0.2-0.3 percent of GDP in revenue each year, the equivalent of $30-$40 billion in the United States.

Of course the London exchange is not the only stock market that imposes a transactions tax, the Hong Kong market does as well, as do several markets in China and India. In fact, most stock markets around the world had transactions taxes until recently. Even the United States had a tax of 0.12 percent on new stock issues and 0.04 percent on trades of existing issues until 1964.

In spite of these taxes, countries have managed to maintain strong financial markets and healthy economic growth. Maybe the WSJ editorial writers will one day be able to escape its right-wing dungeon and get some facts about the world.

Comments (11)Add Comment
Does Baker Herd Cats For a Living?
written by izzatzo, November 04, 2011 9:03
"The main reason the scheme hasn't been enacted anywhere is that even a small tax on every financial transaction would drive business someplace else unless everyone was in it together.


Exactly. Any economist is aware of government failure known as the Cat Herd Effect associated with fatally flawed regulations and taxes.

When something is prohibited or taxed it simply moves to the next point of least resistance to avoid it, causing it to be elastic instead of inelastic.

The only exception is property tax which cannot be avoided and has become the tax of last resort, which explains why property taxes were the main driver of the Deep Recession through the negative income effect from more houses purchased at higher prices as Giffin Goods rather than the usual price substitution effect of moving into smaller houses.

The WSJ didn't miss the housing bubble. It knew there was a higher power than mere market prices driving it - socialist taxes - the same kind that will cause a Great Double Dip if implemented on financial transactions.

Stupid liberals.
...
written by John Q, November 04, 2011 9:24
Maybe the WSJ editorial writers will one day be able to escape its right-wing dungeon and get some facts about the world.


And promptly be fired!
(For, as we know, reality has a a liberal bias....)
...
written by Greg S, November 04, 2011 9:42
what planet are you on, izzatzo?
Stupid who?
written by Jim, November 04, 2011 9:50
Izzatzo: read the fucking piece before you embarrass yourself. Oh wait..
waht
written by k, November 04, 2011 9:50
"If the WSJ had heard of the London Stock Exchange they would know that it has a 0.5 percent tax on stock trades"

And if you had any understanding of economics you would be aware around 70% of those transactions are exempt and are so for good reason - why would the UK government refuse a tax you claim they already have?

The EU commissions own analysis report states a 1.8% reduction in GDP across Europe as a result of this tax and that was only from assessing its impact on security's -

Its true impact will be the loss of half a million plus jobs and billions per year of tax revenue - IT COSTS MORE THAN IT CAN EVER MAKE..
...
written by Jim, November 04, 2011 10:18
Now I feel silly. This dopey fuck is obviously either retarded or trolling:

"The WSJ didn't miss the housing bubble. It knew there was a higher power than mere market prices driving it - socialist taxes - the same kind that will cause a Great Double Dip if implemented on financial transactions. "

In what universe would that make any sense?
...
written by anonymous, November 04, 2011 11:41
I'm sorry, but this is nonsense.

I agree with your sentiment and desires here, but you need to stay grounded somewhat in the facts. Do some journalism: try to find out what percentage of high-frequency traders on the LSE are subject to this tax? Then the fraction of trades by Hedge funds or similar on the LSE that pay this tax? Maybe the fraction of all trading? Not getting much? Lost in the zeros? Maybe look bottom up - is anyone paying this tax (yes, a few people), who are they (do I need to foreshadow this?), and even then what percentage of _all_ trading pays this tax (hint, it starts with a zero, and has several more zeroes before you get something else). There is a transaction tax on the books, a stamp fee, that occasionally hits some people - yes - but you need at least some basic further research as to what and when it hits.

There is a story here. Indeed, several, if you look the right way.

But it needs work. Real journalism.

Your article as is is basically dishonest. For practical purposes, the LSE does not operate under a 0.5% tax on transactions. With respect, you don't yet understand enough to even usefully disagree with this point. Learn. Great stories lie therein.

...
written by bmz, November 05, 2011 10:11
Wait! Izzy has a point--raise death taxes and fewer will die!
The UK Thinks It is Getting Lots of Money from this Tax
written by Dean, November 05, 2011 10:16
Anonymous,

your quarrel is with the UK revenue service, not me. They think they are getting lots of money from this tax (check the cites in my paper). You seem convinced that they are not because everyone evades it. Perhaps you can straighten them out.
Fairly dishonest, k.
written by rede, November 05, 2011 3:08
here is the link to the European Commission paper i believe you are referring to: http://ec.europa.eu/taxation_c...smt_en.pdf

you did not accurately represent the conclusion the commission reached on the effect of a financial transaction tax on GDP growth and unemployment. it was more complex and much less categorical than you have depicted here.
British transaction tax
written by Rich Hodde, November 07, 2011 12:52
It would have been helpful to have data to show the economic impact of initially implementing a transaction tax.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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