Would you favor cutting the top income tax rate to, say, 10%, and imposing a flat across-the-board financial transaction tax of 1% per transaction?
How is this consumption tax a war on the poor?
It isn't a consumption tax. Are a lot of people confused about this?
Ooh, something I just thought of. If we assume most major financial players are pretty savvy, we can assume an FTT would reduce transactions only to the point of marginal profit. Might give some insight into the actual value of the economy.
1% seems very high for a transaction tax. It seems hard to predict what kind of revenue this wold generate, the number of trades would plummet but by how much?
Agree. As I said I made the number up - the idea would be to have it high enough to generate sufficient revenue but not so high it becomes self-defeating to that end.
I am in favor of the premise but I'd want more info before agreeing to the percentages
Fair enough. I kind of made the percentages up. They could certainly be adjusted pending info on predicted effects.
No, even retaining the progressive system it still pushes the burden towards the poor. Since a greater number of people would have to pay more in taxes it would reduce consumer spending and growth. It's why we have sin taxes: to cut spending.
Not sure if I follow. Not many poor people engage in many financial market transactions. The only potential risk I see to the poor/lower middle class is the possible costs to pensions/SS/retirement. But there are likely ways to address that.
sounds like more of a war on the poor.
because when you make $15k/year, that 1% makes a difference. when you make $150k/yr, the 1% doesn't hit as hard.
and there are ways around calling a financial transaction, a transaction. these loopholes don't usually apply to buying groceries, but seem to pop up in corporate spending and campaign contributions. the rich are very good at staying rich.
A financial transaction tax is a tax on transactions in the financial MARKETS - not a tax on income or spending. So the poor person is taxed only if he or she is playing the stock market or buying bonds.
goodness, I apologize. I took that wrong. so how does this work with market -tied retirement funds?
That's an excellent question and one of the arguments against an FTT. The simple proposal in my question does not address it. I agree that it is an important consideration. Various proposals suggest different ways of dealing with it. One thing I
think would be important is making sure people had some management rights over their retirement funds to prevent a large number of transactions that could be subject to tax. Some proposals also suggest different rates depending on transaction type.
but different rates by type of transaction would open up loopholes again.
And watch our economy come to a grinding halt?
Why a grinding halt? I agree it would have a depressive effect on financial transactions but I would be very surprised to see it have enough of an effect for the "grinding halt" assessment. But I am not a finance expert and open to other perspectives
A financial transaction tax is the worst tax that can be made. It is the most market disturbing tax. Denmark which veritas calls socialist is strongly against it. Only countries like France are even considering it.
Thank you for this example of an ad hominem.
The EU is considering it - not just France.
Only some bureaucrats, the French and some loud people like this. It's not going to happen. The British would rather give their first born than accept it.
So you mean a regressive tax rate that will hit the poorest and most vulnerable people the hardest?
I think that's exactly what is being suggested. Because that's how society should work, right? The poor serving the rich, social Darwinism style.
Apologies. Misread the question.
I still dislike the idea of a of a flat tax, even with a financial transaction fee. Financial institutions are geniuses at legally avoiding taxes and creating mechanisms to avoid such things.
To clarify, by "flat" fee I'm referring to the FTT itself, meaning it won't depend on the type of instrument or the amount of the transaction. It's actually a progressive tax - since the bulk of financial transactions are undertaken by the wealthy.
The income tax system would retain progressive marginal rates - they would just top out at a much lower rate. The idea would be to generate most revenue through the FTT. Primarily a thought experiment - I have not personally run the numbers.
Avoiding it would theoretically be much more difficult than sales tax and income tax avoidance, because this would be directed at exchanges that already have a lot of tracking. It doesn't matter if you hide money in an offshore company; if you use it
in any way in the US, you have engaged in a taxable transaction that I believe would be more traceable than most transactions currently are. Some have suggested things like only allowing enforcement of taxed trades as a way to curb avoidance.
Thank you, Bethany.
Initially I said no, but after reading your discussion below I think it could work. However, I still feel there should be no income tax at all
Not sure why it posted twice, sorry about that
how does this work with stock trading? can these be bundled?
Numbers could be adjusted etc. - just been stumbling on some interesting analysis of FTT and it got me thinking. It seems to accomplish the conservative goal of reducing income tax dramatically and reducing debt without having to cut things like SS.
I'd be happy even with a cent per transaction tax.
Would that cover the lost revenue from lowering income tax?
The number are hard I find, but I have read that financial transactions in the US are into the tens of quadrillions annually - so barring a dramatic drop in financial transactions, it would not only make up for lost revenue, it would pay off the US
debt - the DEBT, not just the deficit - within ten years or less.
Interesting. How do you define financial transactions in this scenario?
Basically any transaction in the financial markets - bonds, stocks, trades. Essentially it would be like a sales tax but applied to the finance sector rather than the consumptive sector.
This seems like a good idea. I'm surprised that we haven't done something like this already.
Think about it for a few minutes - in particular, whom it affects the most, and it becomes less surprising ;)
In fairness, such a tax would almost certainly reduce the frequency/quantity of trades - the analysis of how much it would reduce it is hotly contested.
Yeah. The 1% owns something like 50% of all stocks, so I'm sure that passing something like this would be tough.
I would prefer a consumption tax ONLY, but I wouldn't be entirely opposed to this.
This proposes an even lower tax that would still raise a bunch of money. I think that 1% would be a good rate until we paid off the debt, and then
it could be lowered to 0.5% or so.
Right - most of the proposals I see have different rates for different financial products, and tend to range from .01% to about .5%. I bumped to 1% to bundle with a huge income tax decrease, less as a math problem and more to stimulate discussion.