The Wall Street Journal reported on the growing interest of many Democrats in Congress in using a financial transactions tax (FTT) to both raise revenue and reduce the amount of speculative trading in financial markets. The article refers to the tax hypothetically as though it is something that does not actually exist in the world. It also includes a statement by Representative Barney Frank, the head of the House Financial Services Committee, that the tax would be difficult to enforce if put in place "country by country." Actually, the UK has had an FTT in place for decades. Relative to the size of its economy, the tax raises the equivalent of almost $40 billion a year in the United States. It raises this amount even though it is only applied to stock trades, not trades in options, futures, credit default swaps and other derivative instruments. Until the early 90s, Japan also had an FTT that raised more than 4 percent (@ $120 billion in the U.S.) of its government revenue. There clearly is no problem with imposing an FTT country by country, although it obviously would be desirable to have international cooperation in enforcement.
--Dean Baker
