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Securities Transaction Taxes for U.S. Financial Markets

  • Robert Pollin

    ()

    (Department of Economics and Political Economy Research Institute (PERI), University of Massachusetts, Amherst)

  • Dean Baker

    (Center for Economic and Policy Research (CEPR))

  • Marc Schaberg

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.

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File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume29/V29N4P527_558.pdf
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Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 29 (2003)
Issue (Month): 4 (Fall)
Pages: 527-558

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Handle: RePEc:eej:eeconj:v:29:y:2003:i:4:p:527-558
Contact details of provider: Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA
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  1. Stiglitz, J.E., 1989. "Using Tax Policy To Curb Speculative Short-Term Trading," Papers t2, Columbia - Center for Futures Markets.
  2. Summers, L.H. & Summers, V.P., 1989. "When Financial Markets Work Too Well : A Cautious Case For A Securities Transactions Tax," Papers t12, Columbia - Center for Futures Markets.
  3. Roll, R., 1989. "Price Volatility, International Market Links, And Their Implications For Regulatory Policies," Papers t10, Columbia - Center for Futures Markets.
  4. Jones, Charles M & Seguin, Paul J, 1997. "Transaction Costs and Price Volatility: Evidence from Commission Deregulation," American Economic Review, American Economic Association, vol. 87(4), pages 728-37, September.
  5. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1987. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc.
  6. John Y. Campbell & Kenneth A. Froot, 1993. "International Experiences with Securities Transaction Taxes," NBER Working Papers 4587, National Bureau of Economic Research, Inc.
  7. Peter C. Reiss & Ingrid M. Werner, 1996. "Transaction Costs in Dealer Markets: Evidence from the London Stock Exchange," NBER Chapters, in: The Industrial Organization and Regulation of the Securities Industry, pages 125-176 National Bureau of Economic Research, Inc.
  8. Shleifer, Andrei, 2000. "Inefficient Markets: An Introduction to Behavioral Finance," OUP Catalogue, Oxford University Press, number 9780198292272.
  9. James Tobin, 1978. "A Proposal for International Monetary Reform," Eastern Economic Journal, Eastern Economic Association, vol. 4(3-4), pages 153-159, Jul/Oct.
  10. Donald B. Keim & Ananth Madhavan, . "The Cost of Institutional Equity Trades," Rodney L. White Center for Financial Research Working Papers 8-98, Wharton School Rodney L. White Center for Financial Research.
  11. Levine, Ross & Zervos, Sara, 1996. "Stock markets, banks, and economic growth," Policy Research Working Paper Series 1690, The World Bank.
  12. Philip Arestis & Panicos O. Demetriades & Kul B. Luintel, 1997. "Financial Development and Economic Growth: the Role of Stock Markets," Keele Department of Economics Discussion Papers (1995-2001) 97/05, Department of Economics, Keele University.
  13. repec:fth:pennfi:68 is not listed on IDEAS
  14. Umlauf, Steven R., 1993. "Transaction taxes and the behavior of the Swedish stock market," Journal of Financial Economics, Elsevier, vol. 33(2), pages 227-240, April.
  15. Subrahmanyam, Avanidhar, 1998. "Transaction Taxes and Financial Market Equilibrium," The Journal of Business, University of Chicago Press, vol. 71(1), pages 81-118, January.
  16. Ananth Madhavan & Matthew Richardson & Mark Roomans, . "Why Do Security Prices Change? A Transaction-Level Analysis of NYSE Stocks," Rodney L. White Center for Financial Research Working Papers 20-94, Wharton School Rodney L. White Center for Financial Research.
  17. Davidson, Paul, 1997. "Are Grains of Sand in the Wheels of International Finance Sufficient to Do the Job When Boulders Are Often Required?," Economic Journal, Royal Economic Society, vol. 107(442), pages 671-86, May.
  18. Brorsen, W., 1989. "Futures Trading, Transaction Costs, And Stock Market Volatility," Papers 188, Columbia - Center for Futures Markets.
  19. Eichengreen, Barry & Tobin, James & Wyplosz, Charles, 1995. "Two Cases for Sand in the Wheels of International Finance," Economic Journal, Royal Economic Society, vol. 105(428), pages 162-72, January.
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