18 Nov 2011

Occupy Wall Street should be asking for a 0.1% FTT

The Occupy Wall Street protestors need something concrete to campaign for. Well, given that David Cameron is currently trying to block the introduction of a 0.1% Financial Transaction Tax, claiming that it won't work unless it's global, how about them insisting that Barack Obama should introduce the 0.1% FTT in the USA too? If the EU and the USA were doing it, Cameron's excuses would start to look distinctly feeble.

I had another look at the numbers in the B.I.S. preliminary report for 2010 that is available here. By compiling the different tables, I got the following numbers for visible financial transactions in the USA for 2010.

Some of the numbers are truly eye watering. The Fixed Income Clearing Corporation handled 1,206 trillion dollars, the CHIPS system handled 365 billion, and the Fedwire 608 trillion. Overall, transactions were virtually 3000 trillion dollars. OK, it's down a bit from the peak of 3,453 trillion in 2008, but it's still pretty impressive.

Imposing a 0.1% FTT on that could generate 3 trillion dollars, a value substantially higher than the total US government tax revenue for 2010 which was 2.33 trillion dollars (see table below, compiled from the figures on the IRS website).
In other words, a 0.1% FTT could potentially allow the USA to abolish every one of the existing taxes. Hey, the Tea Party and the Republicans should be joining the Occupy Wall Street movement too! And since you don't need tax collectors to get the money coming in (it would just need a couple of lines of code in software), the US government could sack the entire Internal Revenue Service staff... Republican heaven!

Sure, the imposition of the tax would certainly lead to some drop off in activity. But the great thing about FTTs is that you can vary the level every day if necessary to keep the revenue coming in at the required rate.

Increase the FTT to say 0.5% and the US might even be able to  pay off its entire national debt (close to $15 trillion) in a year.

Frankly, what's the problem? Why isn't everyone campaigning for an FTT??

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