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Stephen Laniel comes up with a nice find: An old Larry Summers paper tentatively advocating a small tax on securities transactions. Co-authored with Victoria Summers, it's called When Financial Markets Work Too Well: A Cautious Case For a Securities Transactions Tax," and like most arguments for a securities tax, is pretty convincing. The abstract:
Unlike most major industrialized nations, the United States does not impose an excise tax on securities transactions. This article examines the desirability and feasibility of implementing a U.S. Securities Transfer Excise Tax (STET) directed at curbing excesses associated with short-term speculation and at raising revenue. We conclude that strong economic efficiency arguments can be made in support of a STET that throws "sand into the gears," in James Tobin's (1982) phrase, of our excessively well-functioning financial markets. Such a tax would have the beneficial effects of curbing instability introduced by speculation, reducing the diversion of resources into the financial sector of the economy, and lengthening the horizons of corporate managers. The efficiency benefits derived from curbing speculation are likely to exceed any costs of reduced liquidity or increased costs of capital that come from taxing financial transactions more heavily. The examples of Japan and the United Kingdom suggest that a STET is administratively feasible and can be implemented without crippling the competitiveness of U.S. financial markets. A STET at a .5% rate could raise revenues of at least $10 billion annually.The whole paper is available for download here. Summers was writing in the late-80s. That number is much larger now. Dean Baker estimates that a well-designed STET could raise more than $100 billion a year. Moreover, this is a progressive tax that could slow down speculative trading, "lengthen the horizons of corporate managers," and raise quite a bit of money. It's responsive to both federal revenue shortfalls and the crisis on Wall Street. And is anyone really prepare to argue that we can't afford a tax that slows the manic pace of the stock market?Summers, of course, hasn't said anything about this in public. I wonder if he still supports it. Someone should ask him.
