Economists line up on “Robin Hood” tax

Written By: - Date published: 9:16 pm, April 15th, 2011 - 31 comments
Categories: economy, education, gst, health, tax, water, youtube - Tags:

1000 economists have written to the G20, about to meet in Washington, and to Bill Gates, asking for a tax on financial transactions known as a Tobin tax after its originator, or a Robin Hood tax as it is known in the US. The full text of the letter is here.

Dear G20 Finance Ministers and Bill Gates,

We write to you as the call for a Financial Transaction Tax is now gathering global momentum, and the French government has made it a key priority for their G20 presidency.

This tax is an idea that has come of age. The financial crisis has shown us the dangers of unregulated finance, and the link between the financial sector and society has been broken. It is time to fix this link and for the financial sector to give something back to society.

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.

This money is urgently needed to raise revenue for global and domestic public goods such as health, education and water, and to tackle the challenge of climate change.

Given the automation of payments, this tax is technically feasible. It is morally right.

We call on you to implement the FTT as a matter of urgency.

Yours.

According to the Guardian, French president Nicolas Sarkozy, who is chairing the G20, has commissioned billionaire philanthropist Bill Gates to examine innovative ways to fund development, and France and Germany are known to be keen on the idea of a financial transaction tax.

The economists’ initiative is  supported by a website, www.robinhoodtax.org. It’s worth a look. The banks oppose it, surprise surprise, according to CNN news. It would need international co-ordination to work. It is effectively a GST on financial services – New Zealand’s GST is lauded by our conventional neoliberal economists as comprehensive, even though financial transactions are excluded from it.

Three New Zealanders are among the 1000; Prue Hyman, Stefan Kesting, Peter Conway, and Petrus Simons. Good on them.

[Update, omitted Peter Conway from the list, thanks george.com]

31 comments on “Economists line up on “Robin Hood” tax ”

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  1. Draco T Bastard 1
    15 April 2011 at 9:26 pm

    This money is urgently needed to raise revenue for global and domestic public goods such as health, education and water, and to tackle the challenge of climate change.

    Money is not a resource. Restrain and regulate the financial sector sure but don’t lose sight of the fact that we must live within limits.

  2. Jen 2
    15 April 2011 at 9:45 pm

    In addition to providing a new revenue stream( Christchurch rebuild anyone) a financial transaction tax imposed on transactions involving the NZ dollar could  reduce the extreme fluctuations in the value of the dollar which  cause exporters so much difficulty. Draco,  the argument about money not being a resource could equally apply to other taxes & it just seems odd that one of the most damaging and unproductive aspects of the economy( financial speculation of ugly financial derivitives) escapes taxation when an innocent bottle of milk  attracts GST.

    • Draco T Bastard 2.1
      16 April 2011 at 2:37 pm

      I was getting at the implied if we have money we can do anything. It kinda pisses me off as our economy is, contrary to the teachings of mainstream economists, limited to the physical resources available. I certainly aren’t against bringing the delusional financial sector to heel.

  3. RedLogix 3
    15 April 2011 at 10:12 pm

    Of course not.
     
    The highest priority of US politics at present is eliminating taxes on the very wealthiest few at the top of the system. After all why should these great and good people have to contribute to the common good that us ordinary scum consume so undeservedly?

  4. LynW 4
    15 April 2011 at 10:35 pm

    I believe a financial transaction tax is the fairest tax of all, morally and feasibly.

  5. georgecom 5
    15 April 2011 at 10:55 pm

    4 Kiwis have signed, Peter Conway (an economist) from the NZCTU is also on the list along with Hyman, Kesting & Simons. 

    • NickS 6.1
      16 April 2011 at 11:31 am

      For fuck’s sake, it’s pretty simple to realise that dumping a raw google scholar search without refining it to focus only on the subject you’re after isn’t going to provide anything more than padding, let alone specific evidence in your favour. Especially since google still needs to add citation count features to hunt down keystone papers.

      For example, by adding “” around tobin tax, it cuts down the number of results from 27000 to a much more manageable 5000 odd. However, you’d also need to do a parallel search for related terms, as tobin tax is merely a specific form of currency tax. Furthermore, you still need to actually make a point. Which a search dump does very little to do except when dealing with search terms that apply to technical areas, such as “mutational robustness”.  

      What you should have done, was either wait until you had some spare time to do a proper post, or just link to the wikipedia article you twit:
      http://en.wikipedia.org/wiki/Tobin_tax

  7. ak 7
    16 April 2011 at 12:20 am

    Jeepers. 

    Economists     no less.

    Jim Anderton and the Democrats, take a bow.

    Red-letter day for Progression here, bros and tuahine

    That tide’s a-turning, do our NACT fish know?
        

    No.

    Their 1953 fantasy would be nice to have

    They’re breeding for a majority

    Despite genetic inferiority

    And so, so nice

    But their stench

    and scat

    Is irredeemable

    In its fat

    And dead.    

     

  8. ghostwhowalksnz 8
    16 April 2011 at 6:57 am

    Not so fast on the UK share transaction tax.

    Because the UK tax code provides exemptions from the Stamp Duty Reserve Tax for all financial intermediaries, including market makers, investment banks and other members of the LSE,[74] and due to the strong growth of the contracts for difference (CFD) industry, which provides UK investors with untaxed substitutes for LSE stocks, according to the Oxera (2007) report,[70] more than 70% percent of the total UK stock market volume, including the entire institutional volume remained (in 2005) exempt from the Stamp Duty . Wikipedia

    A loophole for 70% of the transactions ?

  9. Jenny 9
    16 April 2011 at 9:05 am

    ‘
    If you are interested, you can Join the Facebook group, for “Tax Justice” campaign.

    Just click here to view the Facebook page, to see how this popular grass roots campaign is taking off.

  10. freedom 10
    16 April 2011 at 9:27 am

    for those who have never seen this little gem

    • Jenny 10.1
      16 April 2011 at 10:01 am

      ‘
      The bankers hit back.

      If Parliament signs the Trans Pacific Partnership Agreement which is currently being negotiated, any future New Zealand government which tried to bring in a “Robin Hood” tax could face massive fines backed up with trade sanctions.

      Tax on Speculation Could Be Blocked Under TPPA

      capcha – “city” 

  11. higherstandard 11
    16 April 2011 at 9:57 am

    I have concerns about who would get and utilise the income from this tax – and whether it would have some perverse outcomes that we can’t envisage.

    That being said I can’t think of any good reason not to introduce this tax as long as there is some degree of certainty that it can’t be avoided, must be reported per banking group as a percentage of financial transactions and isn’t surreptitiously passed on as a cost to the general public.

  12. marsman 12
    16 April 2011 at 10:14 am

    Why is there no GST on financial transactions?

    • RedLogix 12.1
      16 April 2011 at 12:09 pm

      If you taxed GST all financial transactions, eg savings/eftpos accounts, mortgages etc… you would finish up taxing the same income two, three or more times. Simply not supportable.
       
      The whole point of FTT’s is that the rate is so low that it does not affect ordinary ‘main street’ transactions in any material way… but does catch the vastly larger sums of money routinely shuffled around by the finance industry.

  13. prism 13
    16 April 2011 at 11:38 am

    Sounds good – like the fair GST that supposedly hits everybody equally.   And it will be activated in the chain of evolution before the wealth of the country morphs into a form  which cannot be firmly grasped by ordinary people and finally vapourises.

  14. Afewknowthetruth 14
    16 April 2011 at 12:25 pm

    1.Economics, as practised in the modern world, has no validity whatsoever -it is all based on assumptions which are completely detached from reality and various fantasies, such as that resources magically appear when needed and there is no such thing as pollution.

    2. Economists have zero credibility. Even after they have got totally everything wrong they cannot agree why.

    3. Writing to G20 to ask them not to line the pockets of elites is on a par with writing to a fox to ask him not to eat chickens.

    All a bit of a joke. But it’s not April Fool’s Day.   

    • NickS 14.1
      16 April 2011 at 12:55 pm

      /groan

      You’re a idiot, as there isn’t just one school of economics, nor one set of methodological assumptions. There’s a whole ecology of them, some of which are highly empirical, others of which are less so, and thus some stuff fits and predicts observed phenomena quite well. Branding the whole field as invalid just displays your own ignorance and ideological blinds about the some what less dismal than it used to be science of economics.

      3. Writing to G20 to ask them not to line the pockets of elites is on a par with writing to a fox to ask him not to eat chickens.

      Except for the fact that the finical meltdown delivered a shift kick to the nads to overly optimistic and nice thoughts about the finance and currency trading service industry that’s lead to the current head of the G20 to actually propose this in the first place.

  15. Samuel Hill 15
    16 April 2011 at 12:45 pm

    This is complete bullshit. These so called liberals still hold on to the idea of working with the capitalist system. Taxing transactions does not create any wealth, it sucks millions of dollars from investors to the governments, who then just spend it on more corporate shit. They never expand on social spending when they receive greater taxes. These economists need to pick up their balls and challenge for real change.

    These economists are weak minded and this tax idea serves nothing but to live out a self-fulfilling prophecy where their economic degrees are relevant in today’s corrupt world.

    • RedLogix 15.1
      16 April 2011 at 2:48 pm

      The US ‘main street’ GDP is something in the order of U$12 trillion; while by contrast the almost totally untaxed ‘financial services’ industry in that country is worth, very conservatively at least U$50 trillion. (It’s rather hard to come up with a number, there are so many assumptions and guesses you have to make… I’ve seen estimates 10 times higher.)
       
      This is how the very wealthy top billionaires and corporates in the world avoid paying tax altogether… they turn their wealth into financials that are outside the tax system.  In this way something in the order of almost 50% of the actual wealth in the world avoids making any contribution to the common good whatsoever.
       
      This is what really makes me angry with the likes of Paula Benebasher, she gets away with demonising a small percentage of ordinary people struggling to get by one the meanest benefit systems in the developed world… while all the while the real parasites by many, many orders of magnitude are the top predator capitalists. These avaricious wolves having captured for themselves  an obscene lump of loot for themselves (usually by rorting the taxpayer one way or another), then sneeringly repudiate even the most elementary social obligations to those same fellow humans that made them so rich.
       
      In order to work a FTT has to be introduced more or less globally. It only takes one major nation such as the USA to renege in order to kill the idea. As I said above given that the highest priority of the USA political scene at present is the reduction of even vestigial taxes on the wealthy… then I am very sceptical that anything will happen.

  16. prism 16
    16 April 2011 at 1:34 pm

    Oh right do nothing while seers sit around and examine their navels Samuel Hill.  The idea of not doing anything because it won’t solve every problem 100% of the time and anyway the system is wired wrong just leads to atrophy.

    Here’s an idea.  Reducing the budget to Treasury with its deep pockets and lots of nerds with comfortable seats and computers that measure and model along the narrow lines dictated.  Treasury should have to work out of a small office above a wooden store similar to the office that Walmart had when it started.   Walmart will have a bigger office now they have driven tanks over the competition,  but Treasury and, indeed all, economists should have the minimum of what they need and be told to get on with it.  I don’t know their budget but it is sure to be massive – they come out of the woodwork where people get paid huge hourly fees –  ‘Because we’re worth it!’ They would know about the moral hazard of being makers of policy for declining finances which doesn’t touch them where it hurts.

    Perhaps then there would be less backroom pundits and more upfront clued up business people innovating, and money freed up to provide seed funds or guarantees for entrepreneurs.  And there would be less government hacks to be given cushy jobs running down government services to all.   They would be part of the all then, the ordinary society, feeling the jabs that others notice.  A sharply educational experience I would say.

    • KJT 16.1
      16 April 2011 at 10:38 pm

      Treasury could be replaced with a recording of Don Brash saying cut spending and taxes and save as all the cost of buying their, wholly predictable, advice.

  17. nadis 17
    16 April 2011 at 5:23 pm

    It’ll never work in practice.  Governments currently engage in negative auctions on tax breaks etc to attract the finance industry to start with.  And the problem with a FX Tobin tax is that FX transactions aren’t centrally cleared in the same way as exchanges like NYSE or LSE etc do. Even if they were, it’s avoidable – I transact in LSE listed securities on a regular basis and don’t pay stamp duty, without breaking the law.
    Banks would avoid a Tobin tax simply by matching transactions in a jurisdiction that doesn’t levy it – BVI, Caymans, Singapore or any other money laundering paradise.
    I don’t know what the answer is – but lets be blunt.  What we are talking about is a transfer of wealth form the first world to the third world.  I have no conceptual problem with that, but two practical problems.
     
    1.  Much of the money would end up back in Switzerland in the private bank accounts of the third world elite, and 2,. so what if we do raise 3 billion people out of poverty, reduce third world  mortality rates to first world levels – how does our planet cope in a resource sense?  How many more resources (especially water, forget energy and food) are we going to need if the gdp per capita of 3 billion people rises from 1-3000 to 10,000 (20% of the top end ogf the first world) or 20% or higher?

    Whats the end game then?  War, pestilence, plague?  The world will look like Africa where the marginal output of one extra person is significantly less than the resources required for that person to live.
     

    • Locus 17.1
      17 April 2011 at 7:16 am

      “Whats the end game then?  War, pestilence, plague?”

      Raising 3 billion people out of poverty? What greater goal could there possibly be?! 

      If we could all work towards providing jobs, education and health services for everyone…. we wouldn’t have to worry about reduced mortality rates because birth rates would fall.

      If you ignore poverty, neglect increasing mortality rates, and let wealth continue to accumulate in the hands of the few, then war, plague and pestilence are exactly what you’ll reap. 

  19. Mike Smith 19
    17 April 2011 at 4:11 pm

    Here’s the Guardian’s view about the opposing arguments – they’re bogus.
    http://www.guardian.co.uk/commentisfree/2011/apr/17/observer-editorial-financial-transaction-tax-good

  20. Samuel Hill 20
    18 April 2011 at 7:09 am

    Honestly, these economists are more likely to help the economy by giving John Key a blow job than they are by speaking more jibberish.

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