Over in The Times today, Bob Herbert pushes the transaction tax, one of my favorite policy ideas. The mechanics are simple: The tax would levy a small fee — up to, say, 0.25 percent — on the sale or transfer of stocks, bonds and other financial assets. On first glance, this doesn't seem like it would raise much money. But that's because most folks don't realize exactly how many trades occur, and how much of the stock market is rapid-trade speculation. Dean Baker estimates revenues would easily pass $100 billion. But would it be a good tax? Taxes do two things: They raise money, and they discourage activity. A tax on gasoline makes people use less gasoline. A tax on cake makes people eat less cake. So the question with a new tax is, at least in part, whether it's discouraging the right sort of thing. But that's rarely asked. And it's even more rarely understood as a benefit. Discouraging bad things is a good thing.So take the transaction tax. A transaction tax would discourage stock and currency speculation. That's a good thing. It makes it harder to game the stock market based on trading tricks rather than the legitimate pricing of information and risk. That's good. Let's balance the budget on the backs of speculators.A similar tax has been proposed on e-mail. If you had to pay .01 cents for every e-mail you sent, you'd hardly notice the quarter tacked onto your bill at month's end. But spammers would. Indeed, it would probably cripple their business. Which would mean fewer people are defrauded by spam and less useful e-mail is lost amidst the torrent of junk. Again, it discourages something we want discouraged. So too with the tax on soda in New York. They need revenues, and decided to get them by making it harder to do something people should be doing less of -- getting obese -- rather than making it harder to work. So too with proposed taxes on carbon. Conversely, the payroll tax hits the first $103,000 if income. What it's discouraging -- though the effect is very slight -- is working. That's not good. It may be necessary. But it's not good.We are going to need more revenues in coming years. So thinking this way about taxes is a good habit. In recent elections, Democrats have bought heavily into a conservative tax paradigm that holds that taxes are too high and too complex and good policy solves those problems. That was as true for Obama's tax proposals as for Bush's. Democrats need to do better. And part of that is thinking more about what you tax, rather than how much you tax. Related: What does a progressive tax policy look like? THINKING CREATIVELY ABOUT TAXES.
Over in The Times today, Bob Herbert pushes the transaction tax, one of my favorite policy ideas. The mechanics are simple: The tax would levy a small fee — up to, say, 0.25 percent — on the sale or transfer of stocks, bonds and other financial assets. On first glance, this doesn't seem like it would raise much money. But that's because most folks don't realize exactly how many trades occur, and how much of the stock market is rapid-trade speculation. Dean Baker estimates revenues would easily pass $100 billion. But would it be a good tax? Taxes do two things: They raise money, and they discourage activity. A tax on gasoline makes people use less gasoline. A tax on cake makes people eat less cake. So the question with a new tax is, at least in part, whether it's discouraging the right sort of thing. But that's rarely asked. And it's even more rarely understood as a benefit. Discouraging bad things is a good thing.So take the transaction tax. A transaction tax would discourage stock and currency speculation. That's a good thing. It makes it harder to game the stock market based on trading tricks rather than the legitimate pricing of information and risk. That's good. Let's balance the budget on the backs of speculators.A similar tax has been proposed on e-mail. If you had to pay .01 cents for every e-mail you sent, you'd hardly notice the quarter tacked onto your bill at month's end. But spammers would. Indeed, it would probably cripple their business. Which would mean fewer people are defrauded by spam and less useful e-mail is lost amidst the torrent of junk. Again, it discourages something we want discouraged. So too with the tax on soda in New York. They need revenues, and decided to get them by making it harder to do something people should be doing less of -- getting obese -- rather than making it harder to work. So too with proposed taxes on carbon. Conversely, the payroll tax hits the first $103,000 if income. What it's discouraging -- though the effect is very slight -- is working. That's not good. It may be necessary. But it's not good.We are going to need more revenues in coming years. So thinking this way about taxes is a good habit. In recent elections, Democrats have bought heavily into a conservative tax paradigm that holds that taxes are too high and too complex and good policy solves those problems. That was as true for Obama's tax proposals as for Bush's. Democrats need to do better. And part of that is thinking more about what you tax, rather than how much you tax. Related: What does a progressive tax policy look like? 
