Tax Reform for the New Millennium: Part 1

The First in a new series of policy articles by the Institute for American Renewal

In recent months, we at the IAR have noticed an increase in politicians taking an interest in unconventional tax plans, the latest seems to be the LVT, which while a perfectly reasonable tax, has become something of a fad. So The IAR decided to present a series of interesting and sometimes unconventional tax proposals - both state and federal level - from a variety of thinkers and economists to broaden options.

First off, The Tobin Tax.

In recent years we have seen dangerous and rampant speculation in the Asian markets, this has damaged national economies and put fear into the hearts of many a economy minister and central banker. These problems were caused in part by short-term currency speculation, a scourge of international financial stability, it was the downfall of Bretton-Woods and it continues to be a major issue. The economist James Tobin has a solution, a Financial Transactions Tax, a very small tax, a charge of between 0.1% and 1% on the conversion of one currency into another. This would be a significant annual rate on transactions involving the purchase and sale of currency in a single day, week, or month, but it would be too low to deter long-term investment. Thus the FTT or Tobin Tax would decrease volatility and speculation at minimal cost to economic growth.

Now James Tobin will tell you that his tax is not for the purposes of revenue generation but rather as a fiscal tool to solve financial disorder, and he's right, an FTT would raise little in the scheme of things, and its main aim is to curb dangerous speculation, still what revenue it does raise could be useful, some have suggested using it to bail out failing companies, rather than subject the taxpayer to paying up. and there are countless other uses.

All in all, the implementation of the Tobin Tax could be of great benefit to our nation's financial wellbeing.