As we keep battling over the revenue side of the deficit problem, why isn't a tax on high-frequency market transactions part of the discussion?
Briefly, from the Businessweek piece:
One proposed solution gathering support is a transactions tax—possibly just a few cents per $100—that would throw sand into the gears of high-frequency trading. The European Parliament came out in favor of the concept earlier this year. Britain already has a half-percent "stamp duty" on stock sales that traces its origins to 1694; it hasn't kept London from being one of the world's chief financial centers.
The behavior is a creation of mathematicians, designed to take advantage of miniscule arbitrage opportunities on a large scale. That might generate millions for hedge funds and other institutions, but it creates nothing of real economic value. It's not the kind of long-term investing that results in job creation. And as we saw in May, it's a time bomb.
In other words, not only would taxing such transactions generate revenue without affecting real economic activity; it would also reorient destructive incentives.
But alas, we see this:
Of course, the financial industry has powerful allies in Washington. When the SEC toughened its trading rules after the crash last May, Eric Cantor, who's set to become House majority leader, scolded the agency. "I am concerned that this was done before conducting a holistic review of the causes of the disruption," Cantor, a Virginia Republican, wrote to the SEC on May 21. Bloomberg News reported on Nov. 9 that high-frequency trading firms with names like Getco, Hard Eight Futures, and Quantlab Financial have more than quadrupled their political giving over the last four years; Cantor was one of the high-frequency traders' top recipients, getting $23,000 since the start of 2009 for himself and his political action committee. (Cantor wasn't available to comment for the Bloomberg News story, his spokesman John Murray said.)
Seems to me that should be hung over the heads of Republicans like Cantor. While these thugs off-load millions, putting the entire market at risk, mainstreet continues to feel the pain that comes with day-to-day living. A tax like this should be a no-brainer – and I’m willing to bet it would poll 95-5 if presented to voters.