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Posts Tagged ‘Gordon Brown supports transaction tax on financial industry’

The Echo of John Maynard Keynes

Posted by Larry Doyle on November 30th, 2009 1:14 PM |

British economist John Maynard Keynes

British economist John Maynard Keynes

When in doubt, increase taxes.

Further taxing of the financial industry seems like an appropriate policy given the bailouts provided over the last few years. Screw Wall Street, right? Yeah, hit them harder!! They deserve it. While I understand and appreciate the current rage directed at the financial industry, increasing taxes strikes me as an overly simplistic answer to a complex problem.

Increasing taxes on the financial industry is not a new idea. In fact, the noted economist John Maynard Keynes promoted this idea back in the 1930s. It was neither put into practice then nor again when resurrected in the 1970s. Will it be implemented currently? Bloomberg addresses this topic in writing, Taxing Wall Street Today Wins Support for Keynes Idea:

John Maynard Keynes proposed a tax on financial transactions in the middle of the Great Depression, and another economist, James Tobin, revived the idea in the 1970s as a way to counter currency market speculation. Neither effort gained much acceptance. Now, a growing number of economists and politicians argue that it’s time for a levy on trading stocks, bonds, currencies and derivatives.

U.K. Prime Minister Gordon Brown said on Nov. 7 that a transaction tax might compensate for the billions of dollars that the public has spent on bank bailouts. Government officials in France, Germany and Austria have voiced their backing. U.S. Treasury Secretary Timothy Geithner answered Brown a day later, saying the tax was not something the U.S. would support. House Speaker Nancy Pelosi, on the other hand, says the idea has “substantial currency” among congressional Democrats.

While on the surface increasing taxes on Wall Street seems reasonable, its success presumes that nothing would change in how Wall Street transacts business. We should not be so naive. (more…)






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