A Correction on Dean Baker's Tax Proposal

I just had an email exchange with him, and he referred me to his (along with Robert Polli and Marc Schaberg) paper, Securities Transaction Taxes for U.S. Financial Markets, and he does in fact call for a sales tax on most securities.

ABSTRACT: This paper examines the viability of security transaction excise taxes (STETs) as one policy tool for promoting a more stable financial environment, specifically with respect to the U.S. economy. Contrary to a large recent critical literature, we show that a STET can be designed without creating large distortions between segments of the financial market. We also show that a modest STET for the U.S.—beginning with a 0.5 percent tax on equity trades and scaled appropriately for other financial instruments—would generate substantial new government revenues, on the order of $100 billion per year.

The link is to the abstract, and the whole paper is a 55 page double spaced PDF, which you need to read on paper, with a highlighting and a regular pen so you can take notes.

It's not a light read, but it's a good read.

On a more general level, I think that, given the current downturn, we will see a large expansion in taxes at all level, with things like internet download sales being taxed, and that we will see an aggressive pursuit of online and mail order sales taxe evasion too.

The state and local governments will have no choice.

Then again, considering my record on predictions, and the fact that the only formal training I ever had on economics was high school, where I did a presentation on microeconomics^*, what the heck do I know.

^*Microeconomics is a study of the economics of individual businesses, as opposed to entire economies. I prefer it, because the systems are not so huge and complex that cause and effect breaks down. Macro economics sometimes makes my head hurt.