1,000 economists may have signed this letter but that\’s just 1,000 economists who are wrong.
Even at very low rates of 0.05% or less, this tax could raise hundreds of billions of dollars annually and calm excessive speculation. The UK already levies a tax on share transactions of 0.5%, or ten times this rate, without unduly impacting on the competitiveness of the City of London.
So let us address just this one point they make, about stamp duty on share purchases.
What actually is the effect of this?
Stamp duty is thus shown to depress share prices, particularly for firms whose shares are
frequently traded. This may increase the cost of capital faced by firms, which in turn could have
negative repercussions on investment. Stamp duty also distorts the signals that share prices send
about the profitability of firms, as share prices are also affected by expectations of future
turnover volumes and stamp duty rates. Our results show that these effects are real and
measurable. This finding is important both in discussion about the benefits of abolishing stamp
duty, as well as for the wider debate on the merits of transaction taxes, including the
controversial “Tobin –tax”. It remains open, however, whether the negative effects of alternative
sources of tax revenue would be smaller than those of stamp duty.
Oh, you mean that stamp duty, by depressing share prices, makes capital more expensive for companies? More expensive capital thus meaning less investment, thus lower productivity of labour and so lower wages for the workers?
And, of course, lower returns for pension funds?
And as to the wider tax, we have the IMF\’s considered opinion:
Its real burden may fall largely on final consumers rather than, as often seems to
be supposed, earnings in the financial sector.
And as they go on to note, the more widely the tax is imposed, the more internationally, the more this becomes true. The incidence of the tax is not on the banks or the banksters, it\’s on you and me.
1,000 economists may have signed on to this but that\’s just 1,000 economists who are wrong.
Our list of economists does, after all, include Richard Murphy. Yes, a retired accountant from Wandsworth is included in this list of the international economists. And Prem Sikka, a Professor of Accounting. Not really inspiring great confidence in the rest of the list, is it?
Is your argument a version of the familiar argument that all tax is ultimately a tax on jobs? Is there a huge body of uncontested evidence that this is the case? Just asking, like.
The list doesn’t only include people who didn’t go to an approved-by-you university. The usual social-democratic suspects are on there – Krugman etc.
The usual social-democratic suspects are on there – Krugman etc.
some of the supporters of this tax are cretins, but you don’t have to be a cretin to support it.
you can believe that a) we need to raise more tax revenue and b) the distribution of the incidence of this tax is preferable to the incidence of other potential taxes and c) the effects upon behaviour within the financial system will be beneficial.
“Even at very low rates of 0.05% or less, this tax could raise hundreds of billions of dollars annually and calm excessive speculation.”
Surely any tax that raises this amount of money must have some effect on the economy and so if you support you should say what the effect would be?
it’s the latest version of the free lunch; to claim that you can remove hundreds of billions of dollars of trading profit without any impact is beyond nonsense. The high volumes are a function of an almost frictionless trading system, raise taxes and the entire business migrates or closes. It is pretty binary. So don’t get confused about the worthiness of the aims, health education and water (funnily enough I thought we already spend money on those) and , naturally climate change, but instead think about the unintended consequneces of reshaping the finanical world. The French who support this believe they have nothing to lose, the US are rightly fearful of the loss of liquidity and frankly suspicious about US corporates (for that is what they are) forking over hundreds of billions to a self appointed bureacracy will oppose it. Britain with it’s post war history of giving away our advantages for zero return in order for politicians to feel good about themselves, will probably back it.
“some of the supporters of this tax are cretins, but you don’t have to be a cretin to support it.
you can believe that a) we need to raise more tax revenue and b) the distribution of the incidence of this tax is preferable to the incidence of other potential taxes and c) the effects upon behaviour within the financial system will be beneficial”
Maybe, but I think we can say everyone who signed the letter is a cretin. Using the UK’s stamp duty regime as an argument for the RHT is a gating item into the the non-cretin debate.
In Thatcher’s day it was just 364 economists who signed a leter saying she was wrong. I guess thats inflation.
I agree with Luis – the capital flight argument is mostly mythical, Reuters proved it might benefit everyone if HSBC fucked off anyway, perhaps a small charge on transactions won’t do any harm – if incidence affects jobs, perhaps there is someone else to blame than the government?
I think, timmy, that you imagine all CEOs are neo-Smithians (by which I mean mis-readers of Adam Smith, like your other blog host).
any evidence Carl? any arguments to back up your assertions? is your real name Richard Murphy aka the Murphmeister?
yes I’m Richard Murphy
Keep them coming Tim. Your vitriol can keep many a psychologist busy.