Robin Hood Tax?

While I continue to work on my post on the Australian election, I thought I’d post this quickie. I’ve previously proposed a similar idea to this, and now the concept of a so-called “Robin Hood tax” is gaining traction. Of course, many of the people who would have to pay such a tax say it is “naïve” and “damaging”, but I really don’t think a tax as tiny as the one proposed (0.05%!) would have any significant impact on legitimate trading. It would however limit the sort of speculative trading that led us into the global financial crisis, and it would generate more than enough revenue to pay for the Wall Street bailout. And what fairer way to pay for it? The fact that we don’t actually have such a tax—and there isn’t any indication from our governments that it is even being considered—suggests to me that not much has really changed since the GFC, and that big business is still above the law.

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of course big business is above the law: they tell the government what laws to make!
most of us are still naive enuf to believe the government actually represents us despite a lifetime of experience demonstrating otherwise. this is consistent with the way adults continue to believe in the fairy tales they were taught as children. we’re really pathetic and as long as this condition exists things will only get worse. now that there’s an erection i mean election coming up all these millionaire Democrats (redundant) are asking the common people to send them money when they have done nothing but serve their corporate master(bator)s all these years. they all make me sick, Republicans, Democrats, Tea Party, just corporate whores and mislead religious racists, etc.. grow up and grow some brains, people.

  
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Certainly, a lot of people support the idea of a Tobin tax internationally.

Domestically, such a tax would carry a price tag, but I wouldn’t rely on business people to estimate the costs.

  
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You know, the U. S. had laws in place which could have prevented all of this from happening in the first place — especially the Glass-Steagall Act of 1933, until Senator Phil Gramm and other conservative “supply siders” (Tax the poor and give to the rich) decided to undo it.
Ultimately, the intelligence and justice of this proposal will be its undoing — especially in the U. S. where the Republicans and the “Tea Party” have the population more afraid of anything which smacks of “socialism” than they are of terrorism.

  
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Without the complete cynicism of Scavenger’s comments, we’d of course have to address the issues brought by Mark Crawford and Firefly.
Add to these comments, the questions of:

Whom would regulate the banking industries?
Whom would collect the taxes?
How would the money be allocated and spent?

The FDIC is one example of the banks, in the US, supposedly doing just this type of regulated protection plan for just the types of reasons that the S & L failed in the 80′s and the current failure of ’07-08.
Both times, the banks, and the regulators both failed to collect even the basic levels of contributions to these funds, so when the crisis occurred, hundreds of banks in the 80′s and thousands of banks in ’07-’09 were unable to insure their assets to even the low levels that they were required to be supported by existing laws. This lead to the Feds (Tax Payers) needing to come in and save banks which were supposed to already have paid insurance over 20 years to make sure that they wouldn’t repeat the failures of the late 80′s.

http://problembanklist.com/five-largest-failed-banks-the-biggest-one-is-not-on-the-fdic-failed-bank-list/

http://www.newsneconomics.com/2009/04/failed-bank-list-surprises.html

http://www.faqs.org/abstracts/Business-general/FDIC-seeks-bank-premium-increase-FDIC-increases-insurance-premiums.html

http://www.dailyfinance.com/story/investing/financial-reform-returns-200-million-to-depositors-of-six-faile/19563350/

So with these examples of the industry failing in two instances in the US and with some examples of Britain, to even do what is already on the books as law, it is unlikely that even an additional (0.05%) transactional tax will be followed in these countries.

What is worse is that even if succesfully collected, the corruption levels in the third world nations would pretty much negate any benefit of giving even at these massive levels unless it went through NGO’s which through no fault of their own are also subject to the whims of the corrupt governments.

Take Haiti, Somalia, Ethiopia during the 80′s and 90′s, etc. Billions have been spent on these countries, but most of the money is in Zurich, the Caymans, Monaco and other tax shelter/banking secret rights countries.

It would take quite a world of reformatting of priorities before even this relatively simple to implement, low tax, solution would have the impact or enforcable results that seem just around the corner if people would buy in.

Unfortunately history repeats itself, because people think they know better, instead of simply not proceeding down the same line of reasoning.

Oh, and yes Modern Republicans were at the helm of each of the sinking ships of state, so at least we know, like Enron when it comes to central planning, they are the ones most likely to run into the icebergs as they are always the smartest people in the room. And of course they are also the ones that find a way never to feel much of the consequences, as they wrote the laws that said it was legal to do the things in the first place…

So the Democrats win the next election.

Democrats have the problem of trying to fix everyone’s problems at the same time, and unfortunately the bureacracy of administering the complex solutions ramps up the costs to be internally unsustainable, so they start giving parts of it to private industry, which sees the cash cow opportunity to “print money”. Fraud and waste go up even greater than before, which sets up the situation for the Democrats to lose…

Repeat this cycle 8 times in America over the past 64 years and you can see how the US has gotten into its current prdicament today.

  
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@Akacra – These are just the same sorts of logistical issues faced by every new tax. If there really is a will, history has shown they can be overcome.

@Scavenger – I can’t entirely agree with you. I mean, Obama has stood up to the pharmaceutical companies to push through health care reform at huge political cost. So the democrats are better.

@Firefly – Sadly, I have to agree with you. Americans’ paranoia over socialism is just totally absurd and destructive. Obama’s health care reforms really ought to be a non-brainer, but the opposition to it has been unbelievably strident – he could get kicked out of office for helping ordinary Americans.

  
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The Robin Hood Tax idea sounds ok in theory, but in addition to the hurdles mentioned by Akacra above, there are practical questions of application. For example, please define “legitimate” trading, as opposed to “speculative”. It’s a lot like defining obscenity or immorality, speculation is in the eye of the beholder. There are legitimate uses for virtually every investment vehicle out there on the market, even the most complex derivatives. And who is to say speculation is always a bad thing? Many small companies got their big break from speculators willing to take a chance.

Finally, there is the problem of using this tax as a fix all, and ignoring the problems at the very origin of this current crisis: predatory mortgage lending, and corrupt real estate valuers. These people got the ball rolling with assessing houses at outrageous prices, and setting complex mortgage rates for the financially illiterate lower class. Most of these groups have gotten off scott-free in this case, and by instituting this tax, we are overlooking the bigger foundational problems.

  
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Originally Posted By sagredo
For example, please define “legitimate” trading, as opposed to “speculative”.

The tax doesn’t seek to do this – it will be on all trading. The basic idea is that a tax will put people off frivolous (e.g. speculative) trading, and encourage long term investment, as that will mean less tax – speculative trading requires a lot of trades, while serious investment doesn’t require as much.

Also, nobody is saying that this tax alone will solve all the problems of the stock market, but that isn’t a reason not to implement it if it’s a good idea.

  
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