What is a financial transaction tax?
Report

What is a financial transaction tax?

Editorial Rating

8

Qualities

  • Applicable
  • Background

Recommendation

A financial transaction tax (FTT) as a new source of government income is a hot-button issue in the United States. In this focused, accessible overview, economist Aaron Klein explains how an FTT works, who pays it and what its potential revenues might be under different plans. He distills the debates about the ramifications of the tax and provides evidence from other countries of its possible impacts. Wall Street denizens and Main Street investors will find great value in this impartial report on a significant financial proposal.

Summary

A financial transaction tax (FTT) is already in place in the United States.

An FTT places a levy on the buy and sell orders of assets such as equities, credit instruments, derivatives and options. The United States already imposes a transaction tax of about two cents on every $1,000 traded. 

Some supporters are recommending increasing the FTT to 0.1%, with some variations by type of asset. The US Congressional Budget Office estimates that, over 10 years, a 0.1% tax – roughly $1 on each $1,000 transacted – would raise $777 billion, equivalent to about 0.5% of GDP and to the total amounts collected via excise taxes in America.

An FTT is a progressive...

About the Author

Aaron Klein is a fellow at the Brookings Institution and its policy director on regulation and markets. 


More on this topic

By the same author

Biggest Financial Regulation Stories of 2017, and What to Watch in 2018
8
Is Cash Still King?
8
A Federal Backstop for Insuring Against Cyberattacks?
7
Is China’s New Payment System the Future?
8
Four Ways to Make Wiser Infrastructure Investments
8
America’s poor subsidize wealthier consumers in a vicious income inequality cycle
9
Understanding Non-Prime Borrowers and the Need to Regulate Small Dollar and “Payday” Loans
9
Four Questions to Ask Before Breaking Up the Banks
9
Financing U.S. Transportation Infrastructure in the 21st Century
9
Fiscal Therapy
8
Darkness by Design
8
From Wall Street to Bay Street
8
One Hour Investor
7
The Economic Consequences of Major Tax Cuts for the Rich
7
Capital and Ideology
9

Related Channels