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Economists Urge Tax on Financial Transactions

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April 14, 2011

A group of 1,000 economists from 53 countries has signed a letter to the Group of 20 finance ministers calling on them to introduce a tax on financial transactions as a way to combat global poverty and climate change.

The letter went out, oddly enough, not only to G-20 government financial leaders on Wednesday, but also to Microsoft chairman Bill Gates. Not that the economists wanted to get their hands on the latest version of Microsoft Excel. Actually, Gates has been asked by the G-20 to come up with some innovative ways to fund development and climate change, and the economists believe that the financial transaction tax could help people who have been affected by the economic crisis.

The letter-writing effort was started by a group backing the so-called Robin Hood Tax, which is now also referred to as the Tobin Tax, after Nobel Prize-winning economist James Tobin, who originally suggested a currency transaction tax. Among the 53 economists who have signed the letter are Jeffrey Sachs, director of the Earth Institute at Colombia University and an influential advisor to UN Secretary General Ban Ki-moon, as well as Dani Rodrik from Harvard University, and Ha Joon Chang from Cambridge University.

At previous G-20 meetings, the Tobin Tax has come up for discussion, but Treasury Secretary Timothy Geithner has been cool toward the idea and kept it from getting very far with other leaders. But perhaps as the Obama administration has again revived talk of raising taxes on the wealthy, it may be more receptive to the idea of a Robin Hood Tax at the next G-20 summit. Here’s the text of the letter, which should be a nice boost for Mr. Gates’ ego:

Dear G20 Finance Ministers and Bill Gates,

We write to you as the call for a Financial Transaction Tax is now gathering global momentum, and the French government has made it a key priority for their G20 presidency.

This tax is an idea that has come of age. The financial crisis has shown us the dangers of unregulated finance, and the link between the financial sector and society has been broken. It is time to fix this link and for the financial sector to give something back to society.

Even at very low rates of 0.05% or less, this tax could raise hundreds of billions of dollars annually and calm excessive speculation. The UK already levies a tax on share transactions of 0.5%, or ten times this rate, without unduly impacting on the competitiveness of the City of London.

This money is urgently needed to raise revenue for global and domestic public goods such as health, education and water, and to tackle the challenge of climate change.

Given the automation of payments, this tax is technically feasible. It is morally right.
We call on you to implement the FTT as a matter of urgency.

 

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