Dear Europe: Good Luck With That Financial Transaction Tax

Italian Lire
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Italian Lire

The latest proposal for a financial transaction taxis probably the most sensible one in years.

In the past, financial transaction taxes have been weighed down by ridiculous attachments to ideas of managing market volatility or creating a “bailout fund” for failed financial firms.

But this time it looks like there will be no such policy tie-in. The tax would just exist to raise revenues.

This kind of taxation would still have negative effects on trading volume and liquidity. But since its goal is to raise revenues, it would have to be kept small enough so that liquidity and trading volume doesn’t dry up too much.

What’s more, this could be a welcome development for American markets.

We’d likely benefit from a tax on trading in Europe. Our markets would be relatively more liquid and less taxed.

So, my European friends, good luck with your new tax. Wall Street will no doubt send you a thank you note.


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