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Bill Gates Advocates Tax On Financial Transactions 694

Posted by timothy
from the and-you-thought-you-hated-atm-fees dept.
First time accepted submitter wanzeo writes "With the current G-20 summit dominated by global financial uncertainty, previously unsuccessful tax strategies are getting new attention. In a short interview with the BBC, Bill Gates explains his support for a potential tax on financial transactions. The concept is sometimes called the Tobin tax after its originator, Nobel Laureate economist James Tobin, who first put forth the idea in 1972. Gates points to the success of Britain's Security Settlement Tax, and suggests that large economies like Germany, France, and the U.S. have expressed interest in his plan."
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Bill Gates Advocates Tax On Financial Transactions

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  • A first (Score:5, Insightful)

    by tbannist (230135) on Tuesday November 08, 2011 @09:52AM (#37984238)

    This might be one of those rare times when I actually agree with Bill Gates. A tax on financial transactions should reduce or stop some of the most exploitive behavior in the financial world. "High frequency" trading would become much less profitable, as would the even less ethical exploit of attempting to generate out of date quotes by overloading a trading system system.

    • Re:A first (Score:5, Insightful)

      by sycodon (149926) on Tuesday November 08, 2011 @10:02AM (#37984336)

      While I'm on the fence about the tax, I am definitely with you on making high frequency trading as difficult and least profitable as possible.

      HFT is what crashes markets at a moment's notice. It can destroy companies in a matter of minutes. And it also an affront to the entire concept of a market where well informed buyers make well informed decisions about the value of a product.

      • by bill_mcgonigle (4333) * on Tuesday November 08, 2011 @10:57AM (#37984986) Homepage Journal

        While I'm on the fence about the tax, I am definitely with you on making high frequency trading as difficult and least profitable as possible.

        Most people know this and the only people who like high-frequency trading are those who profit from it directly. The markets work for these traders and these traders work for the markets.

        Normal people and the companies listed on the markets are hurt by this arrangement. They would gladly take their business to another market that had more sane trading rules.

        Which gets to the actual problem - regulations on securities markets. We have a classic example of regulatory capture here, so starting a competing market is effectively impossible. NASDAQ couldn't happen today.

        Like anything else there needs to be a market in markets (sup, dawg), and this has been prevented from happening, so we wind up in this surrealistic position with markets that hurt most of its participants to enrich the very few (a net transfer of wealth). The 1% isn't just on Wall Street - their accomplices in Washington are essential to the mechanism.

    • "High frequency" trading would become much less profitable.

      Any tax at all on high frequency trading would make it unprofitable. If we don't slay that monster (HFT) soon, it will build itself a economic-political fortress that will be very hard to tear down.

    • by Hatta (162192)

      Of course, he comes out in favor of this tax now, when he's already in the process of giving away his billions.

      • Re:A first (Score:4, Insightful)

        by Anonymous Coward on Tuesday November 08, 2011 @10:13AM (#37984452)

        He earned his billions by actually producing a product rather than shuffling money around in HFT. I didn't like some of Microsoft's business practices when he was running the show, but it's not even in the same league as Gold Mansacks.

    • by Greyfox (87712)
      I know right? All that stuff about malaria mosquitoes? Doesn't he realize that eradication efforts have already reduced populations of malaria mosquitoes from billions to somewhat smaller billions? If we don't act fast, the endangered malaria mosquito could disappear from the world! FOREVER! Oh sure, if it's a cute panda bear everyone gets all teary-eyed, but does anyone mourn for the poor endangered malaria mosquito? I'm glad you're with me on this!

      Anywhoo, high frequency trading, just put all orders int

  • by gfxguy (98788) on Tuesday November 08, 2011 @09:57AM (#37984286)

    ... but the government needs to overhaul the system of taxation to a simple system without loopholes, and stop trying to figure out a way to tax everything we do. Once upon a time we didn't even need income taxes; times change, but having the government intrude on every aspect of our lives so that they can tax every little thing is not the way to go.

    You have to ask what is the purpose of taxes to begin with; why do we need them and what's the most effective way to accomplish that, not keep coming up with new schemes that likely can have negative impacts on the economy. Every time the government creates a new tax, the cost of compliance adds to the amount that the government collects; more accountants need to be paid, more paperwork needs to be filled out.... the cost of compliance for the current system (not the taxes paid, but the resources spent figuring out what to pay). The tax foundation projects compliance costs to be in the hundreds of billions (Total Federal Income Tax Compliance Costs, 1990-2015 [taxfoundation.org]).

    There's got to be a better way - overhaul the tax system, don't keep adding to the mess it already is.

    If we don't stop this nonsense, we're going to be taxed for every action we take and the fourth amendment will be a joke. You'll have a federal tax on food (eat beef? Well, beef causes global warming, so you'll have to pay), a commute to work tax; have coffee break tax; drive anywhere tax (this will be beyond what we already pay in gasoline taxes). Every time money changes hands? Is that what you really want? Lend me $20 and pay a tax? How about both of us? Lender tax and borrower tax, and then a pay-you-back (loan repayment) tax. How about a tax on getting money from your ATM? Or transferring money from one account to another? Or every time you pay a bill? It's simply ridiculous to continue along this path.

    • by Twinbee (767046)

      Exactly. I despise the way so few governments care about admin and the hidden cost that is. Simplicity like you say is the key. Even if it makes things a tiny bit less fair overall, it more than makes up for it in paperwork (or the lack thereof). Another case of UWS (unnecessary work syndrome).

      Do you know of a website which promotes a much simplified and universal tax scheme?

      • by gfxguy (98788)

        Do you know of a website which promotes a much simplified and universal tax scheme?

        I do, but if I post it the topic will go off on a tangent of misinformed people bashing the suggestion, despite years and millions of dollars of non-partisan research behind it.

        The problem is there's no such thing as a "perfect" system of taxation; there's no system everyone will agree is "fair," and very often people jump on my suggestion because, as a revenue neutral system, it doesn't do anything to solve the spending cris

        • Sounds like VAT ... we have that in the EU (at various rates), and income tax, and lots of others ...

          Income Tax is based on what you earn, (not what you have left)

          VAT/FairTax is based on what you spend ... and VAT at least is deliberately exempt on "essentials" that you must buy to live, which seems to me to be fairer ...

    • by Antimatter3009 (886953) on Tuesday November 08, 2011 @10:14AM (#37984460)
      Absolutely. I don't understand what's so hard about saying "regardless of its source, all of your income just counts as income, minus some deductions, and you pay a percentage in tax based on these brackets". No special taxes, no loopholes, you just take your total income, put it in brackets, and pay the percentages required. I'm far from an expert so maybe I'm missing something, but I'd love to hear it. This seems so clear cut and simple.
      • by 0123456 (636235) on Tuesday November 08, 2011 @11:06AM (#37985092)

        Absolutely. I don't understand what's so hard about saying "regardless of its source, all of your income just counts as income, minus some deductions, and you pay a percentage in tax based on these brackets".

        Because you're not a politician who's being lobbied to give everyone tax breaks and loopholes so that only the powerless middle-class proles have to actually pay anything.

    • by Anonymous Coward on Tuesday November 08, 2011 @10:15AM (#37984466)

      I think you missing the point of transaction tax. In this particular case, the goal is not so much to create new source of revenue, but to make most dangerous (for the world economy as a whole point of view) trading practices unaffordable. High Frequency Trading makes tons of money out of thin air. No one gets any better except select few trading houses which have enough muscle to participate in this. The transaction tax may have many consequences, but at the very least it will make stock market little bit less rigged.

    • by wye43 (769759)
      Taxes are not about fairness, but about what can and cannot be done. If the government can get away with taxing you for drinking water, they will do it.

      Running a state is not cheap, and any government that will come clean and come up with ONE tax of 95%+ will get overthrown immediately, even if that's the truth, that amount is really required. People want to be lied, they want to pay 300+ different taxes so it sounds they are not paying that much.

      E.G. Denmark will tax you 180% on a car saying that its f
    • by Kjella (173770) on Tuesday November 08, 2011 @10:22AM (#37984538) Homepage

      ... but the government needs to overhaul the system of taxation to a simple system without loopholes, and stop trying to figure out a way to tax everything we do. Once upon a time we didn't even need income taxes; times change, but having the government intrude on every aspect of our lives so that they can tax every little thing is not the way to go.

      Unfortunately, the government isn't the only problem here. Here in Norway we have an oil fund yet at the same time lots of toll roads and toll circles around cities. We're taking up debt so loaning and saving at the same time, while adding a bunch of overhead to boot and really the result is often unjust all the same. We'd do a lot better just adding to the petrol tax and saying that yes we're maintaining a road network, some of you get a new road and others don't but it even outs over time. Instead we have to try millimeter-measuring out costs with tolls. But you'd also get a shitstorm of people feeling this is unfair. People are very much there that "I don't want to pay for that road, let those that use it do" and then you have to keep track of who's using it and who's not. Now it's just electronic pass keys and photo identification, no anonymous cash payments. Somewhere there's a record of every car passing every toll point, which supposedly gets deleted but it certainly is collected.

    • by Ihmhi (1206036)

      I've looked into stuff like FairTax and other flat taxes and I hear about how it's unfair. I really think this is more FUD than common sense.

      It's hard to get more fair than a completely flat tax. Millionaires or billionaires could not completely avoid it because they have to spend money and you wouldn't be able to use a shell company to make personal purchases.

      Lastly, the FairTax (and similar plans I've read about) often have exceptions below a certain income level. I've often heard this cited as unfair aga

      • by gfxguy (98788)

        FairTax does not have exceptions; although I loathe the name, that's why they call it "fair," because it applies exactly the same to everybody.

        Everybody would get the "prebate," (based on number in the household - which would be the ONLY information you'd have to give the government). Even the rich would get the prebate (even if it's mostly meaningless to them).

        That makes things taxable at the same rate, regardless of what they are... milk would be the same as pizza, because instead of tweaking what gets t

      • by necro81 (917438)

        It's hard to get more fair than a completely flat tax. Millionaires or billionaires could not completely avoid it because they have to spend money and you wouldn't be able to use a shell company to make personal purchases.

        It may be equitable, but that is not the same thing as fair

    • by mcgrew (92797) *

      How about a tax on getting money from your ATM?

      You're already paying it, it's a high tax, and not a penny of it goes to the government.

      Or every time you pay a bill?

      Have you ever looked at your utility bills? Already taxed to the hilt.

    • High frequency trading (HFT) amounts to a tax that large financial firms levy by effectively inserting themselves in the transactions of third parties. If you agree that it is detrimental to the country, then how do you get rid of it? You can make a law against it, but enforcement costs money. You can tax it, which creates additional paperwork, but also generates revenue.

      Thus, you have three options:
      1) allow HFT to continue unfettered
      2) spend money enforcing a law to prevent/curb HFT
      3) make money by le

    • Taxes are regressive. All taxes are regressive, all the time. The rich can avoid them, the poor cannot. That is why we should view Taxes not only as revenue generation for necessary government activities, but also as a means to retard the activities that shouldn't be illegal, but society doesn't want, like Prostitution, Drugs etc.

      Drug war is a great example of failed policy to stem the tied of drug use, and has made Mexico a VERY VERY dangerous place with all the narco gangs, who are nothing more than moder

  • Many liberals who think George Soros is a great guy for supporting this "tax on the rich" don't realize that Soros is one of the rich guys who stands to profit handsomely from it [lewrockwell.com]:

    With markets less liquid, the market makers that make the markets liquid and efficient will be hampered by a Tobin tax (they will now need a spread of over 1%) and this will create more profit opportunities for the position trading that Soros does.

    In other words, it's not clear that the Tobin tax would actually make the markets saf

    • High-frequency (program) traders make big investments in computing that is located as close as possible to trading floors. They employ extremely expensive programmers to write highly proprietary code to run on these machines located on prime real estate, in speed of light terms. That's exclusively a rich man's (or firm's) game. I'm hard pressed to think of any way in which such trading helps allocate capital materially better to the real economy, which is the only useful purpose of finance. It's a grand was
  • Will never pass (Score:4, Interesting)

    by Pecisk (688001) on Tuesday November 08, 2011 @10:06AM (#37984378)

    My feelings is that banks are heaviest lobby what are in this world - they own money we need to keep to run this charade called Capitalism. They will hold governments hostage til they will relent on this.

    I really hope that someone will proove me wrong, but this doesn't give any hope:
    " The Chancellor George Osborne has delayed his return to London from Brussels this lunchtime after a row over proposals for a financial transaction tax at a meeting of European Finance Ministers.
            According to sources Mr Osborne asked what was the point in even having a conversation about the financial transaction tax given that it was going to be rejected and then asked if it was âoethe best way to spend our timeâ.
            I understand that the Chancellor said no bank would end up paying the tax and the final payer would be pensioners."
    http://www.bbc.co.uk/news/uk-politics-15640299 [bbc.co.uk]

    As said Will Emerson in Margin Call (played briliantly by Paul Bettany): "One thing I can say for sure: they never loose their money".

    • by arth1 (260657)

      As said Will Emerson in Margin Call (played briliantly by Paul Bettany): "One thing I can say for sure: they never loose their money".

      This is true. But sometimes they lose it.

      • by mcgrew (92797) *

        I don't think that's a typo, the banks should indeed loose more money. It's damned near impossible to get a mortgage or small business loan these days, money's way too tight. The banks loosing money could jump start the economy.

  • Misleading post! (Score:2, Informative)

    by WileyC (188236)

    The "Tobin tax" specifically targets currency trading, not "financial transactions" in general. In fact, the title/body of the original article are so misleading, it should probably be yanked as troll bait. All the gory details can be had here: http://en.wikipedia.org/wiki/Tobin_tax [wikipedia.org]

    • Re:Misleading post! (Score:5, Interesting)

      by dkleinsc (563838) on Tuesday November 08, 2011 @10:37AM (#37984704) Homepage

      The original Tobin Tax was targeting currency trading, but other economists since have proposed it for securities trading as well.

      It tends to hit mostly the high-frequency traders and the big hedge funds who are constantly shuffling huge sums of money around. It has very little effect on somebody who makes a few trades a year as part of a smaller individual investment portfolio.

  • This is a tax that will be paid almost entirely by the middle class. The wealthy have ways to avoid it, and low income folks will mostly not see any impact. But for the vast majority of the middle class, either working for an employer that practically requires pay to be made direct deposit, with loans that are direct draft, with lots of reliance on banking transactions, most of which are entirely unavoidable, will find their accounts draining even faster. Isn't the gouging by the banks of their small cus

  • by MetricT (128876) on Tuesday November 08, 2011 @10:25AM (#37984566) Homepage

    Here's my economic theory of taxing the wealthy. You won't find it in any textbook. It may be right, or it may be crazy...

    There are two types of wealthy people: the ones that actually create economic value (the Buffets, Jobs, and Gates of the world), and the ones who don't.

    The latter became rich, not because of what they accomplished, but because they knew the right people. Went to the right schools. Had executive hair. Had charisma, but no actual ability hiding behind it.

    If you're actually a source of economic value, taxes don't affect you as much as you'd think. Government takes, gives to the poor, makes them a bit richer, and they end up buying more of your product. There may not be a 1:1 correlation, but $1 in new taxes probably ends up being far less than $1 out of their pocket when all is said and done. It may even make you more money.

    If, on the other hand, you're rich purely because of luck, then a higher tax rate affects you a lot more, because you can't count on the wealth you lose being recirculated to you. It will end up going to an actual value creator and not you.

    That's why the Buffets and Gates of the world don't sweat higher taxes too much, and why you hear so much wailing and gnashing of teeth from Wall Street types over the very idea.

    My 2 cents, anyway.

    • by LordNacho (1909280) on Tuesday November 08, 2011 @11:08AM (#37985120)

      If you're looking for the economic term for your two different kinds of rich people, you're looking for "rent seekers" (which are opposed to less well defined people as "entrepreneur" or "capitalist" or "wealth creator"). I'd look it up on Wikipedia, and you can develop it a bit more.

      As for why it's relevant to the debate, typically rent seekers are sitting on some sort of privilege (in law or in the market).

      I would however comment that both Warren and Bill are beyond the point where they're sensitive to financial incentives.

  • by Vitriol+Angst (458300) on Tuesday November 08, 2011 @10:37AM (#37984696)

    We get so excited about the debate of "should we tax or shouldn't we" -- we forget the debate about; "Why do we have a 'Wall Street' to begin with?"
    Turning over a stock in anything less than three years, and definitely less than 1 year is NOT an investment in a company -- it's an attempt to "play the market." One or two day traders might win at this -- but the professionals, who have machines that can trade in nanoseconds and shave time with the competition by using shorter network lengths to WS computers for trades are going to win. Market manipulation is also too lucrative to worry about the SEC and such -- much better to buy the regulators (as we've seen).

    >> However, when we consider the Trillions more that our Government had to bail out Wall Street more than just the public "TARP funds" -- and that banks like Bank of America might be posting bigger losses in the range of $75 Trillion with the FDIC backing them. So a few pennies a trade will require a few hundred years just to PAY BACK expenses they've incurred -- much less "cover" future risks.

    Another way to say this is; who is MORE crazy? The person who wants to tax the Mafia or the person who thinks you cannot trust the mafia in the first place? There is no way a group that can get the FDIC to cover $75 Trillion in "bad bets" after the fact, and AFTER a bail out for the same "mistake" (I call it fraud), is a group that CANNOT get around any tax. The Day Trader will see a tax, but if there is enough of a fee to stop the market manipulators -- be sure that they will get compensated where you are not looking.

    Wall Street's EXCUSE to suck up 40% of all profits is that they help provide funds to let companies grow -- having seen the rampant leveraged buyouts, the VC funds used to sell away parts of companies, and the shuttering of tens of thousands of businesses to provide "fodder" for Hedge Funds -- it's a bit like allowing a Mercenary to continue to operate in a country after wiping out a town, because you've seen him walk a little old lady across the street once.

    I once made my living with Financial Services companies -- but it felt a bit like carrying ammunition for a mercenary. Biting the hand that feeds you should be a mark of integrity, and I'd like to make a living building something or making the world a better place. ALL Financial services are a ruse, because they are predicated on "investing wisely" -- which is always a pitch of "getting back more than you put in." For every wise investment to do better than just the average of stocks, SOMEONE has to lose. By the time a company has stocks on Wall Street, it's either on someone's menu or it has all the money it needs -- and some VC firm reaped that benefit before you did.

  • by gestalt_n_pepper (991155) on Tuesday November 08, 2011 @11:10AM (#37985158)

    Putting the tax burden on those who insist on playing with depositor money, privatizing profits and socializing losses is a start towards fairness. Not much of a start, granted, but a start. Unfortunately, money = unaccountable political power. Until congress and the class from which most of congress comes (i.e. the wealthy) are barred from office, this will never happen.

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