Time for a Robin Hood Tax?
BLOG: Forget Sherwood Forest; here it's the government taking from rich financial deals to let the sector "give something back to society."
Nearly 30 years after Yale economics professor James Tobin first proposed a tax on financial transactions in the 1970s, the idea is gaining steam. These days such a measure is called a Tobin tax or Robin Hood tax -- under either name a levy designed to take from the rich and help the poor. (Initially, the tax was conceived as applying to currency transactions; it since has been broadened to include a range of financial transactions. The idea is that including more types of transactions limits the incentive for traders and investors to move from taxed to untaxed instruments.)
The idea behind Tobin’s proposal was “to throw some sand in the wheels of our excessively efficient international money markets,” and to restore the ability of central banks and governments to pursue monetary and fiscal policies appropriate to their internal economic circumstances, according to a 2003 paper by Willem H. Buiter, professor with the London School of Economics and the political science and chief economist with Citigroup.
Just last month, 1,000 economists from 50-some countries sent a letter to the G20 ministers, urging their adoption of a Robin Hood tax. The letter read, in part, “The financial crisis has shown us the dangers of unregulated finance, and the link between the financial sector and society has been broken. It is time to fix this link and for the financial sector to give something back to society.” Such a tax “would calm excessive speculation” and the money could be used to “raise revenue for global and domestic public goods such as health, education and water, and to tackle the challenge of climate change,” the letter also said.
Among the signatories: Jeffrey Sachs, director of the Earth Institute at Columbia University; Josh Bivens with the Economic Policy Institute; and Susan Helper, professor of economics, Case Western Reserve University.
At the same time, the Tobin Tax Initiative, a project of the International Innovative Revenue Project, which itself is part of the Center for Environmental Economic Development, based in Arcata, Calif., has as its goal “to increase a national dialogue on the Tobin Tax proposal by raising awareness and education among grassroots organizations, opinion leaders, and policymakers in the United States.” It counts among its supporters the Rainforest Action Network and the CEED.
The Robinhoodtax.org, a UK-based group, has garnered support from President Sarkozy of France and Chancellor Merkel of Germany, among other luminaries.
Clearly, the idea of levying some sort of tax on financial transactions has captured attention in some quarters. The next question: What sort of impact would it have? The Institute of Development Studies, a UK-based global charity for international development, research and teaching, reviewed a number of studies that examined the question. They found that a financial transaction tax on foreign exchange transactions could raise $26 billion around the globe, and would be most effective if implemented by the key financial centers around the world.