Anchor ads are not supported on this page.

4S Ranch Allied Gardens Alpine Baja Balboa Park Bankers Hill Barrio Logan Bay Ho Bay Park Black Mountain Ranch Blossom Valley Bonita Bonsall Borrego Springs Boulevard Campo Cardiff-by-the-Sea Carlsbad Carmel Mountain Carmel Valley Chollas View Chula Vista City College City Heights Clairemont College Area Coronado CSU San Marcos Cuyamaca College Del Cerro Del Mar Descanso Downtown San Diego Eastlake East Village El Cajon Emerald Hills Encanto Encinitas Escondido Fallbrook Fletcher Hills Golden Hill Grant Hill Grantville Grossmont College Guatay Harbor Island Hillcrest Imperial Beach Imperial Valley Jacumba Jamacha-Lomita Jamul Julian Kearny Mesa Kensington La Jolla Lakeside La Mesa Lemon Grove Leucadia Liberty Station Lincoln Acres Lincoln Park Linda Vista Little Italy Logan Heights Mesa College Midway District MiraCosta College Miramar Miramar College Mira Mesa Mission Beach Mission Hills Mission Valley Mountain View Mount Hope Mount Laguna National City Nestor Normal Heights North Park Oak Park Ocean Beach Oceanside Old Town Otay Mesa Pacific Beach Pala Palomar College Palomar Mountain Paradise Hills Pauma Valley Pine Valley Point Loma Point Loma Nazarene Potrero Poway Rainbow Ramona Rancho Bernardo Rancho Penasquitos Rancho San Diego Rancho Santa Fe Rolando San Carlos San Marcos San Onofre Santa Ysabel Santee San Ysidro Scripps Ranch SDSU Serra Mesa Shelltown Shelter Island Sherman Heights Skyline Solana Beach Sorrento Valley Southcrest South Park Southwestern College Spring Valley Stockton Talmadge Temecula Tierrasanta Tijuana UCSD University City University Heights USD Valencia Park Valley Center Vista Warner Springs

Curmudgeon Don Bauder's view of debt

Why not enact the Robin Hood tax?

The derivatives market, which nearly killed us in 2008, could be $1 quadrillion.
The derivatives market, which nearly killed us in 2008, could be $1 quadrillion.

The federal deficit will be a staggering $1 trillion next year. Corporate debt is an astonishing $6.3 trillion. Globally, the derivatives market, which nearly killed us in 2008, could be $1 quadrillion. Speculation is rampant in stock and commodities markets. Computerized high-frequency trading — done in fractions of a second — is more than half of stock market activity. The huge gap between the richest 1 percent and the rest of us is widening. Reforms instituted after the 2008 debacle have been wiped away as lobbyists have fed the sticky fingers of Washington politicians.

Jim Welsh of San Marcos: . The tax “would not dampen speculation as much as people think it would.”

In short, Wall Street and Washington, D.C. greed have put us on the brink of a global crisis again.

There is a pill we could take that would alleviate — but hardly eliminate — what threatens to wallop us. It’s the financial transactions tax — a tiny (say, 0.1 percent) tax rate on the buying and selling of stocks, bonds, derivatives, and other financial instruments.

Frank Partnoy: The financial transactions tax “would be very difficult to implement."

Two years ago, the Tax Policy Center said a 0.1 percent tax rate could bring in $66 billion a year, with 40 percent coming from that top 1 percent and 75 percent from the richest 20 percent. According to the New York Times, the proposed tax, sometimes called the Robin Hood Tax, would help redistribute wealth from the non-needy to the needy — a reversal of the trend that began in the 1980s.

Sponsored
Sponsored
Del Mar's Arthur Lipper: “What is the evidence that more government is a valid public objective?”

A 2016 study by the Brookings Institution concluded that a financial transactions tax would raise substantial revenue while curbing speculative short-term and high-frequency trading — thus helping to steer money toward socially useful activities such as capital spending and education and away from gambling, which dominates so much of today’s financial scene. In short, such a tax could encourage long-term investing, or patient capital — a desirable end.

Ross Starr of UCSD: "Financiers are likely to figure out how to make profitable trades without incurring taxes.”

Says Matt Taibbi of Rolling Stone, “A financial transactions tax kills three birds with one stone. It raises money, provides a major disincentive to socially useless volume-based trading, and decreases dangerous speculative volatility.”

Opponents of the tax claim it would have to be instituted globally; it wouldn’t work in one country, because trading would be done in countries without the tax. (Hello, obscure havens Andorra, Nauru, Niue, and Seychelles.) However, Brookings points out that Hong Kong, Switzerland, Singapore, South Africa, and the United Kingdom have thrived despite having such a tax. The United States had one from 1914 to 1965, and a very tiny tax now funds the Securities and Exchange Commission. Billionaires Bill Gates Jr. and George Soros favor such a tax, as do politicians such as Bernie Sanders.

Economists and financial experts with roots in San Diego County may agree with the societal objectives of such a tax but question if it would work and also wonder if side effects may offset the positive aspects. A good example is Jim Welsh of San Marcos, who is a portfolio manager and tactical strategist for Smart Portfolios of Seattle. He believes that in the past three to four decades, corporate boards of directors have concentrated almost wholly on raising stock prices. The share of income going to workers “hasn’t kept pace,” and the economy would be better off if workers got a bigger piece of the pie.

A financial transactions tax would be progressive, spreading more income and wealth down to lower levels at the expense of the plutocrats. But Welsh fears “unintended consequences,” such as possible excessive regulation. The tax “would not dampen speculation as much as people think it would.” When the next recession inevitably comes, the banking system will have to be fortified, and a tax on financial instruments would hurt.

Frank Partnoy, former law professor at the University of San Diego who this year became a professor at the UC Berkeley School of Law, has written extensively on the dangers of derivatives and hyperspeculation. But, he says, the financial transactions tax “would be very difficult to implement. It would require defining what is subject to the tax and what is not, and if we’ve learned one lesson from the financial markets in recent decades, it’s that clever bankers are very good at moving from regulated transactions to equivalent unregulated ones. Such a tax would require international coordination. Without that, the taxed transactions would simply flow overseas.”

Partnoy adds, “If it worked, a financial transactions tax could be a progressive and potentially efficient tool to raise revenue. But the devil is in the details, and financially sophisticated bankers are very good at devilish details.”

Ross Starr, professor of economics at the University of California San Diego, has a similar view. Constructed correctly, the tax could be a force for good. It would have to be “high enough to discourage destabilizing speculation and abusive transactions and low enough that no productive trades are impeded.”

Starr feels high-frequency trading has a leg up on ordinary investors who can’t keep up with the action, “but there is not much evidence that such trades are particularly costly to investors,” he says. A high financial trading tax could severely dent or wipe out such activity. Overall, he agrees with Partnoy. Wall Street and the banking industry will find ways to evade these taxes. “Financial institutions are endlessly creative. Financiers are likely to figure out how to make profitable trades without incurring taxes.”

Some tout the tax as a tax on Wall Street. But Wall Street will only pass it on to investors, says Starr. That is true, but in one sense, the passing of the tax to investors would be progressive: stock ownership is concentrated among the wealthy and upper-middle class. However, the superwealthy don’t buy and sell rapidly, Starr points out.

Del Mar entrepreneur Arthur Lipper, scion of a famous Wall Street family, doesn’t see positives in this tax. “The more the tax, the more the government,” says Lipper. “What is the evidence that more government is a valid public objective?” He, along with others, notes that taxing transactions will reduce market liquidity “to the detriment of investors.”

Lipper says he has a better idea: “What about the government increasing available funds by reducing elected officials’ salaries and pension and health benefits?”

Now, there is a solution that wouldn’t get through Congress.

The latest copy of the Reader

Please enjoy this clickable Reader flipbook. Linked text and ads are flash-highlighted in blue for your convenience. To enhance your viewing, please open full screen mode by clicking the icon on the far right of the black flipbook toolbar.

Here's something you might be interested in.
Submit a free classified
or view all
Previous article

Dia de los Muertos Celebration, Love Thy Neighbor(Hood): Food & Art Exploration

Events November 2-November 6, 2024
The derivatives market, which nearly killed us in 2008, could be $1 quadrillion.
The derivatives market, which nearly killed us in 2008, could be $1 quadrillion.

The federal deficit will be a staggering $1 trillion next year. Corporate debt is an astonishing $6.3 trillion. Globally, the derivatives market, which nearly killed us in 2008, could be $1 quadrillion. Speculation is rampant in stock and commodities markets. Computerized high-frequency trading — done in fractions of a second — is more than half of stock market activity. The huge gap between the richest 1 percent and the rest of us is widening. Reforms instituted after the 2008 debacle have been wiped away as lobbyists have fed the sticky fingers of Washington politicians.

Jim Welsh of San Marcos: . The tax “would not dampen speculation as much as people think it would.”

In short, Wall Street and Washington, D.C. greed have put us on the brink of a global crisis again.

There is a pill we could take that would alleviate — but hardly eliminate — what threatens to wallop us. It’s the financial transactions tax — a tiny (say, 0.1 percent) tax rate on the buying and selling of stocks, bonds, derivatives, and other financial instruments.

Frank Partnoy: The financial transactions tax “would be very difficult to implement."

Two years ago, the Tax Policy Center said a 0.1 percent tax rate could bring in $66 billion a year, with 40 percent coming from that top 1 percent and 75 percent from the richest 20 percent. According to the New York Times, the proposed tax, sometimes called the Robin Hood Tax, would help redistribute wealth from the non-needy to the needy — a reversal of the trend that began in the 1980s.

Sponsored
Sponsored
Del Mar's Arthur Lipper: “What is the evidence that more government is a valid public objective?”

A 2016 study by the Brookings Institution concluded that a financial transactions tax would raise substantial revenue while curbing speculative short-term and high-frequency trading — thus helping to steer money toward socially useful activities such as capital spending and education and away from gambling, which dominates so much of today’s financial scene. In short, such a tax could encourage long-term investing, or patient capital — a desirable end.

Ross Starr of UCSD: "Financiers are likely to figure out how to make profitable trades without incurring taxes.”

Says Matt Taibbi of Rolling Stone, “A financial transactions tax kills three birds with one stone. It raises money, provides a major disincentive to socially useless volume-based trading, and decreases dangerous speculative volatility.”

Opponents of the tax claim it would have to be instituted globally; it wouldn’t work in one country, because trading would be done in countries without the tax. (Hello, obscure havens Andorra, Nauru, Niue, and Seychelles.) However, Brookings points out that Hong Kong, Switzerland, Singapore, South Africa, and the United Kingdom have thrived despite having such a tax. The United States had one from 1914 to 1965, and a very tiny tax now funds the Securities and Exchange Commission. Billionaires Bill Gates Jr. and George Soros favor such a tax, as do politicians such as Bernie Sanders.

Economists and financial experts with roots in San Diego County may agree with the societal objectives of such a tax but question if it would work and also wonder if side effects may offset the positive aspects. A good example is Jim Welsh of San Marcos, who is a portfolio manager and tactical strategist for Smart Portfolios of Seattle. He believes that in the past three to four decades, corporate boards of directors have concentrated almost wholly on raising stock prices. The share of income going to workers “hasn’t kept pace,” and the economy would be better off if workers got a bigger piece of the pie.

A financial transactions tax would be progressive, spreading more income and wealth down to lower levels at the expense of the plutocrats. But Welsh fears “unintended consequences,” such as possible excessive regulation. The tax “would not dampen speculation as much as people think it would.” When the next recession inevitably comes, the banking system will have to be fortified, and a tax on financial instruments would hurt.

Frank Partnoy, former law professor at the University of San Diego who this year became a professor at the UC Berkeley School of Law, has written extensively on the dangers of derivatives and hyperspeculation. But, he says, the financial transactions tax “would be very difficult to implement. It would require defining what is subject to the tax and what is not, and if we’ve learned one lesson from the financial markets in recent decades, it’s that clever bankers are very good at moving from regulated transactions to equivalent unregulated ones. Such a tax would require international coordination. Without that, the taxed transactions would simply flow overseas.”

Partnoy adds, “If it worked, a financial transactions tax could be a progressive and potentially efficient tool to raise revenue. But the devil is in the details, and financially sophisticated bankers are very good at devilish details.”

Ross Starr, professor of economics at the University of California San Diego, has a similar view. Constructed correctly, the tax could be a force for good. It would have to be “high enough to discourage destabilizing speculation and abusive transactions and low enough that no productive trades are impeded.”

Starr feels high-frequency trading has a leg up on ordinary investors who can’t keep up with the action, “but there is not much evidence that such trades are particularly costly to investors,” he says. A high financial trading tax could severely dent or wipe out such activity. Overall, he agrees with Partnoy. Wall Street and the banking industry will find ways to evade these taxes. “Financial institutions are endlessly creative. Financiers are likely to figure out how to make profitable trades without incurring taxes.”

Some tout the tax as a tax on Wall Street. But Wall Street will only pass it on to investors, says Starr. That is true, but in one sense, the passing of the tax to investors would be progressive: stock ownership is concentrated among the wealthy and upper-middle class. However, the superwealthy don’t buy and sell rapidly, Starr points out.

Del Mar entrepreneur Arthur Lipper, scion of a famous Wall Street family, doesn’t see positives in this tax. “The more the tax, the more the government,” says Lipper. “What is the evidence that more government is a valid public objective?” He, along with others, notes that taxing transactions will reduce market liquidity “to the detriment of investors.”

Lipper says he has a better idea: “What about the government increasing available funds by reducing elected officials’ salaries and pension and health benefits?”

Now, there is a solution that wouldn’t get through Congress.

Comments
Sponsored

The latest copy of the Reader

Please enjoy this clickable Reader flipbook. Linked text and ads are flash-highlighted in blue for your convenience. To enhance your viewing, please open full screen mode by clicking the icon on the far right of the black flipbook toolbar.

Here's something you might be interested in.
Submit a free classified
or view all
Previous article

Gonzo Report: Goose may have indie vibes, but they’re still a jam band

Fans turn out in force for show at SDSU
Next Article

WAV College Church reminds kids that time is short

College is a formational time for decisions about belief
Comments
Ask a Hipster — Advice you didn't know you needed Big Screen — Movie commentary Blurt — Music's inside track Booze News — San Diego spirits Classical Music — Immortal beauty Classifieds — Free and easy Cover Stories — Front-page features Drinks All Around — Bartenders' drink recipes Excerpts — Literary and spiritual excerpts Feast! — Food & drink reviews Feature Stories — Local news & stories Fishing Report — What’s getting hooked from ship and shore From the Archives — Spotlight on the past Golden Dreams — Talk of the town The Gonzo Report — Making the musical scene, or at least reporting from it Letters — Our inbox Movies@Home — Local movie buffs share favorites Movie Reviews — Our critics' picks and pans Musician Interviews — Up close with local artists Neighborhood News from Stringers — Hyperlocal news News Ticker — News & politics Obermeyer — San Diego politics illustrated Outdoors — Weekly changes in flora and fauna Overheard in San Diego — Eavesdropping illustrated Poetry — The old and the new Reader Travel — Travel section built by travelers Reading — The hunt for intellectuals Roam-O-Rama — SoCal's best hiking/biking trails San Diego Beer — Inside San Diego suds SD on the QT — Almost factual news Sheep and Goats — Places of worship Special Issues — The best of Street Style — San Diego streets have style Surf Diego — Real stories from those braving the waves Theater — On stage in San Diego this week Tin Fork — Silver spoon alternative Under the Radar — Matt Potter's undercover work Unforgettable — Long-ago San Diego Unreal Estate — San Diego's priciest pads Your Week — Daily event picks
4S Ranch Allied Gardens Alpine Baja Balboa Park Bankers Hill Barrio Logan Bay Ho Bay Park Black Mountain Ranch Blossom Valley Bonita Bonsall Borrego Springs Boulevard Campo Cardiff-by-the-Sea Carlsbad Carmel Mountain Carmel Valley Chollas View Chula Vista City College City Heights Clairemont College Area Coronado CSU San Marcos Cuyamaca College Del Cerro Del Mar Descanso Downtown San Diego Eastlake East Village El Cajon Emerald Hills Encanto Encinitas Escondido Fallbrook Fletcher Hills Golden Hill Grant Hill Grantville Grossmont College Guatay Harbor Island Hillcrest Imperial Beach Imperial Valley Jacumba Jamacha-Lomita Jamul Julian Kearny Mesa Kensington La Jolla Lakeside La Mesa Lemon Grove Leucadia Liberty Station Lincoln Acres Lincoln Park Linda Vista Little Italy Logan Heights Mesa College Midway District MiraCosta College Miramar Miramar College Mira Mesa Mission Beach Mission Hills Mission Valley Mountain View Mount Hope Mount Laguna National City Nestor Normal Heights North Park Oak Park Ocean Beach Oceanside Old Town Otay Mesa Pacific Beach Pala Palomar College Palomar Mountain Paradise Hills Pauma Valley Pine Valley Point Loma Point Loma Nazarene Potrero Poway Rainbow Ramona Rancho Bernardo Rancho Penasquitos Rancho San Diego Rancho Santa Fe Rolando San Carlos San Marcos San Onofre Santa Ysabel Santee San Ysidro Scripps Ranch SDSU Serra Mesa Shelltown Shelter Island Sherman Heights Skyline Solana Beach Sorrento Valley Southcrest South Park Southwestern College Spring Valley Stockton Talmadge Temecula Tierrasanta Tijuana UCSD University City University Heights USD Valencia Park Valley Center Vista Warner Springs
Close

Anchor ads are not supported on this page.

This Week’s Reader This Week’s Reader