Idea of the Day: Why Countries Around the World Are Considering the Financial Transaction Tax

February 25, 2013

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It has been more than 70 years since John Maynard Keynes wrote about the value of a financial transaction tax in “mitigating the predominance of speculation over enterprise in the United States.” A financial transaction tax works by levying a miniscule fee on the estimated $2.9 trillion of daily financial activity through the trading of stocks, bonds, and derivatives in U.S. financial markets, based on our analysis. The tiny tax makes some of the most speculative unproductive trading unprofitable, thus steadying markets and promoting real investment while raising much-needed revenues. Though many countries around the world already have a financial transaction tax in place, the United States does not yet levy such a fee on trading.

While the idea of a modest financial transaction tax—or FTT, as it is often known—has been around for a long time, with budget balances and economic growth strained in the aftermath of the Great Recession policymakers around the world are taking a new look at the tax.

For more on this topic, please see:

• 5 Reasons the World Is Catching on to the Financial Transaction Tax by Adam Hersh and Jennifer Erickson