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Home Publications Blogs Beat the Press Wonkblog Doesn't Like Financial Speculation Taxes

Wonkblog Doesn't Like Financial Speculation Taxes

Friday, 02 November 2012 09:38

That would be the conclusion of folks who played with its interactive calculator on ways to have President Obama reach his deficit reduction target. The calculator includes several possible taxes which it identifies as "the most popular proposals for wholly new sources of revenue." A financial speculation tax is not included on the list. It does include a value-added tax (VAT), which would effectively be a national sales tax.

A bill calling for a financial speculation tax was sponsored last year by Tom Harkin in the Senate and Peter DeFazio in the House. According to the Joint Tax Committee, the tax would raise almost $40 billion a year in revenue. It has a number of co-sponsors in both chambers. By contrast, there is no current bill calling for a VAT and if any members of Congress support one, they are keeping pretty quiet.

Perhaps there are some poll results showing a great desire for a VAT. Otherwise, we can assume that the decision to include a VAT on the calculator and to exclude a financial speculation tax reflects the relative popularity of the two taxes at the Washington Post.

Comments (9)Add Comment
written by PeakVT, November 02, 2012 12:41
Dean, I realize you feel interacting with reporters is basically futile, but I think you're wrong in this case (and not only because the Wonkblog contributors aren't reporters in the traditional sense). So, if you didn't do so, you should consider asking them why they didn't include the option for a financial transaction tax. If you did ask, then including the response (or lack thereof) here would be informative.

The truth is that this is a fairly obscure blog, and unless you actually convince some reporters to change their economic reporting, the vast majority of readers - people who don't have the time or inclination to seek second opinions - will remain poorly informed.
written by JSeydl, November 02, 2012 1:51
PeakVT, I don't follow at all. Everything that reporters publish is fair game to criticize -- it's in the public domain. Hence, Dean isn't obligated to contact every reporter to ask why he/she wrote such and such. Not to mention, that would take a tremendous amount of time. If Dean followed your recommendation, then he might publish just one blognote a week. The 3-4 that he usually publishes per day is, in my opinion, a much more effective way to inform people about how piss poor the state of economic journalism is in this country.
types of taxes
written by mel in oregon, November 02, 2012 2:38
a value added tax is so stupid it's unbelievable. the people that have made out like bandits are the very wealthy who make their money through inheritances, & investments. they don't work in the traditional sense. they should be taxed extremely heavily as they are the ones who have ruined america through speculation & outsourcing. it would be good if a 5% financial transaction tax were put into place, better yet go back to the same tax structure in place in the 1950s. the american people need to wake up & realize they are getting gutted to the gills.
written by yuan, November 02, 2012 4:45
VAT is not a sales tax. In europe VATs typically apply to the entire supply chain making them more of an industrial or corporate consumption tax. A VAT can be structured in a progressive manner or a regressive manner. In fact, I believe that european VATs are more progressive than our regressive federal income tax (60% of my income/benefits does not appear on my W2 -- 401a/403b/457b/IRA/Medical-Dental/LifeInsurance/Annuities/).

Although I would prefer to illegalize highly leveraged speculation, a tobin tax is a useful mechanism to curb destructive speculation.
written by John Q, November 02, 2012 11:46
"the most popular proposals for wholly new sources of revenue."
I guess "most popular" doesn't include returning to the top marginal rates of the Kennedy years, identified in the paper below as the optimal revenue raiser without being a disincentive to seek income.

Wonkblog's Unwonky Calculator
written by Robert Salzberg, November 03, 2012 6:15
Both President Obama and Treasury Secretary Geithner have stated their opposition to a FTT but since the notes about the calculator point out that the tax increases in the calculator also break President Obama's pledge to not increase taxes on anyone making less than $250,000, a FTT should have been included.

More disturbing is that ending the carried interest loophole is a stated policy goal of President Obama but strangely it is included in the Romney calculator but not in the Obama calculator.

Eliminating the tax preference for investment income goes against Romney's stated policy but is included in his calculator but not Obama's. Why?

My real issue is with the calculator's overall design. It doesn't let you pick a level of cutting It's all or nothing in most cases. It also doesn't allow for larger carbon taxes, a FTT or other write in taxes.

A single payer health system and it's cost saving should have been included in any calculator for wonks along with increased defense spending cuts.

But the real wonk part is completely missing. Wonks are focused on policy.

Show me a tax deduction and I'll show you a poorly designed policy.

A wonky solution to reforming the tax code isn't limited to just eliminating or reducing deductions. A wonk solution would rewrite deductions out of the tax code and into more targeted policy that costs the taxpayers less and better achieves the overall goals of the policy.

If, for instance, we extended the full faith and credit of the U.S. to all Americans by extending the power of the federal government to borrow money cheaply directly to all qualifying Americans for conforming loans for their primary residences, we could offer 30 year loans at about 4% rates without costing the taxpayers a dime instead of spending almost 100 billion dollars a year on the mortgage interest deduction.
The other obvious omission?
written by LSTB, November 03, 2012 8:06
No land value tax?

It's not like there are any drawbacks to it.
written by fuller schmidt, November 04, 2012 3:36
Are you thinking of including a tax on futures exchange trading, Dean? It's already taxed as regular income.
14 Aspects of Land Value Taxation or LVT
written by Macrocompassion, November 06, 2012 6:29
affecting Government, Land Owners, Community and Ethics
3 aspects for GOVERNMENT

1. LVT, adds to the national income.
2. The cost of collecting the LVT is much smaller than for income tax and other production-related taxes.
3. With LVT, the national economy stabilizes and no longer experiences the 18 year housing boom and bust cycle.

6 aspects affecting LAND OWNERS
4. LVT is progressive, the owners of the most potentially productive sites pay the most tax.
5. The land owner pays his LVT regardless of how the land is used. When the land is leased to tenants most or all of the resulting ground-rent is the tax.
6. LVT stops the speculation in land prices because any withholding of land from proper use is too costly.
7. The introduction of LVT reduces the sales price of sites even though their value (or potential usefullness) may continue to grow.
8. With LVT, land owners are unable to pass the tax on to their tenant renters, due to the competition for land use.
9. With the introduction of LVT, land prices will drop. Speculators in land values will tend to foreclose on their mortgages and to withdraw their money for reinvestment. LVT should be introduced gradually. It allows investors sufficient time to transfer money to company-shares where their greater use will meet the increased demand for produce (see below).

3 aspects regarding our COMMUNITY
10. With LVT, there is an incentive to use land for production, rather than it laying idle or being partly used.
11. With LVT, greater working opportunities exist due to cheaper land and a greater number of available sites. Consumer goods become cheaper because entrepreneurs have less difficulty in starting-up and running their businesses. Demand grows, unemployment decreases
12. As LVT is introduced, investment money is withdrawn from land and placed in durable capital goods.

2 aspects about ETHICS
13. The collection of taxes directly from productive effort and commerce is socially unjust. LVT replaces this form of extortion by gathering the surplus rental income which comes without exertion. Consequently LVT is a natural system of money-gathering.
14. Bribery and corruption cease with LVT. Before, this was due to the leaking of news of municipal plans for housing development.

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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.