The People’s Budget which the Congressional Progressive Caucus recently introduced has as part of its corporate tax reform a derivatives and speculation tax. For such a proposal to work, the unanimous support of all G20 states is needed. The likelihood of enactment of an FTT in the US is low. A Bloomberg report from 2009 has Treasury Secretary Geithner and the Obama administration opposing it as unworkable since participants would find ways to circumvent the expense and almost all Republican members of the 112th Congress have signed a pledge to vote against all new taxes.
In January of this year, the Center for Economic and Policy Research (CEPR) issued a report called The Deficit-Reducing Potential of a Financial Speculation Tax showing that a 0.25% tax on trades of stocks, options, futures and other financial instruments could generate $40 billion a year for the Treasury. The idea gained support from French President Nicolas Sarkozy who said a financial transaction tax is one of his top priorities as leader of the Group of 20 nations this year. Earlier this month, an article in the Guardian reported that a thousand economists from 53 countries urged the G20 finance ministers meeting in Washington, to adopt a "Robin Hood tax" or Tobin tax on transactions in financial markets as "an idea that has come of age" arguing that even if such a tax was levied at just 0.05%, it could raise hundreds of billions of dollars, which could be ploughed into development projects. This is the launch video for the Robin Hood Tax campaign.
The International Monetary Fund (IMF) issued a Working Paper called Taxing Financial Transactions: Issues and Evidence in March 2011. Dean Baker, co-director at CEPR and author of its report, concluded:
This is not just a hypothetical; the revenue collected by the U.K. on its more narrow tax on stock trades shows that it is possible to collect large amounts of money through such taxes. Furthermore, the incidence would be almost entirely on the financial industry and those involved in very active trading.
The potential revenue from such a tax far exceeds the amount of money involved in most items that are heavily debated in Congress, such as the extension of unemployment benefits or the tax breaks going to the
wealthiest two percent of the population. The revenue from an FST also vastly exceeds the size of the projected Social Security shortfall. Given the amount of money potentially at stake and the progressivity of the tax, it is surprising that it does not feature more prominently in policy debates. It is not clear what possible downsides would be posed by such a tax, except for its negative impact on the income of people connected with the financial industry.