This week’s release of President Donald Trump’s budget, with its draconian cuts to the social safety net and unrealistic projections of future growth, has again shined a light on our fiscal challenges. The U.S. clearly needs additional tax revenue to fund vital programs and investments that underlie future economic growth. As no single tax instrument, by itself, is likely to suffice, a number of incremental measures will be required. In this spirit, three Democratic presidential candidates have proposed a financial transaction tax (FTT) to help fund their proposed investments in health care, education, and infrastructure. If properly designed, an FTT would raise substantial revenue, in a progressive fashion, without impeding price discovery or the efficient allocation of capital.
An FTT is a small tax that would apply to trading in stocks, bonds, and derivatives. For example, an FTT of 10 basis points (0.10%) would result in a $10 tax for every $10,000 in stock sold.
