The editorial board of the New York Times on Thursday called for a financial transaction tax on the buying and selling of U.S. stocks, bonds and derivatives, an idea that has gained traction in the Democratic presidential campaign.
Democratic presidential candidates Hillary Clinton and Martin O'Malley have both called for a narrow tax on some high-frequency trading firms' activities. Fellow Democratic contender Bernie Sanders has called for a broader tax to raise revenue from Wall Street, but his proposal would likely squeeze investors too hard, the paper said.
Republicans have said that no tax is a good tax.
The Times said a financial transaction tax that applies to an array of transactions and is split between buyers and sellers would be a progressive way to raise substantial government revenue without harming the markets.
A tax of 0.1 percent could bring in $66 billion a year, with most of the burden falling on the wealthiest Americans, who own the most financial assets, the paper said, citing a study by the nonpartisan Tax Policy Center. It said a tax rate of 0.3 percent could bring in $76 billion a year, but that any higher a levy would probably lead to less trading and lower revenues.
There are already financial transaction taxes in Britain, Switzerland, South Korea, Hong Kong and other developed and emerging markets, generally at rates of 0.1 percent to 0.5 percent on stock transfers, the Times said.
It added that 10 countries in the European Union, including Germany and France, have agreed to apply a common financial transaction tax starting in 2017, but said lobbying by investment banks and hedge funds could weaken or even derail the plan.
Setting the tax rate low at first and then raising it gradually would help avoid potentially damaging effects on trade volumes, volatility and the ability of markets to determine asset prices, the paper said.