More US research on why a Robin Hood Tax could ride to the rescue of the US deficit
Dean Baker, co-director of the Center for Economic and Policy Research in Washington DC has produced a useful six-page paper looking at the lessons for the US of the UK’s stamp duty on share transactions, which, before the crisis, raised 0.3% of UK GDP for the exchequer. He uses that figure to estimate the impact of a financial speculation tax in the US, if such a tax also covered options, futures, credit default swaps and other derivatives. He comes up with a total tax take of 1% of US GDP, or $150 billion (stamp duty on shares alone, at the UK rate, would produce $40 billion). And the figure could in fact be more (see below). But even at that conservative estimate, over the next decade, an FST would raise twice as much as the cost of the 2009 stimulus package, thus having a huge impact on the US deficit (on top of the impact of the growth that the stimulus package is having). Yet another piece of evidence that a Robin Hood Tax (basically an FST plus a currency transation levy) would be enormously beneficial to the campaign to preserve and extend public goods, fight climate change and reduce global poverty.
Dean may have under-estimated the value of an FST in the US because of two factors. First, UK stamp duty does not apply to all stock transactions – large chunks of the market are in fact already exempt (in reality it bears disproportionately on small share dealers rather than the big financial institutions, which most Robin Hood Tax campaigners would like to reverse). And secondly, the more countries around the world that introduce such taxes, the less scope there is for the finance sector to move some of its activity to other stock markets: although the argument that is repeated ad nauseam about the potential flight of capital is almost certainly massively overstated: the bankers are the boy who cried wolf writ big, and one day may well get bitten badly as a result).