There is a solution to the problems all western governments are having in terms of revenue.There is a tax source that is waiting to be pruned and also will not cost the average citizen a penny in real money or in tertiary liabilities like job loss or limiting choice.
The solution is to start to tax speculative money going across international borders. This idea was originally floated in the mid seventies by Nobel Laureate economist James Tobin and came to be referred to as the Tobin tax but has essentially morphed into what famed economist Maynard Keynes would call a transaction tax.
Originally the idea was this: Whenever a round trip currency speculation goes through...ie whenever somebody invests in a currency and then takes their money right back out then they would have to pay a tax on that investment...This has also been taken farther to include any round trip investment of less than seven days. This would obviously include all the massive hedge fund investments that sometimes are looking for anomalies that exist for mere seconds...
We have created a big casino for Wall Street and their pals to play in. We in the form of the various governments of the world have created and allowed any number of magical financial packages to exist: Black box derivatives, credit default swaps, hedge fund currency dumps etc. and we should have a piece of the game. My father used to say that there is a reason you want to own a casino. They make money.Every time someone lays down a bet the casino takes a cut, every time you go to an online poker site you pay a small percentage of the pot to the owner of the site and the same thing should occur when dealing with this massive amount of speculative circling the globe.
It does nothing for growth(except to the financial sectors), it does nothing in terms of hiring, or in terms of secondary infrastructure( ie infrastructure to be built to support it) and it obscures the real worth of sectors that it floods into leading to bubbles and crashes.
When Tobin proposed the idea it was right after the Breton Woods system collapsed. Up to that point all currencies had to be within a fixed rate of gold deposits. Nixon abrogated that treaty and did not peg the United States dollar to any gold deposit and thereafter essentially all currencies floated and found their own levels. Tobin foresaw the coming telecommunications revolution and with currencies not pegged down, he predicted massive amounts of instantaneous speculation. For an economist this was a very bad idea because it would lead to destabilization which is anathema to long term business planning. Stability in the marketplace allows for planning and investment without surprises.
Sure enough what Tobin warned against has happened. Trillions of dollars go across borders every day, and stay for a bit and then are pulled out landing somewhere else before moving on again. Computer programs and MIT grads are really good at maximizing the chance of a successful bet. That would be fine if we the people of these countries got something from it. If we took a even small piece of that transaction, even just .001% we could go along way in balancing the budgets of participating countries.We are talking billions and billions of dollars.
It would take the at least five countries to sign on but if one of those countries included the United States then it would not be long before other countries signed on.
Not only would it help countries balance their budgets but it would also "dissuade" (a word Tobin liked) this type of investment and force investment maybe to build stuff or hire people.A whacky idea I know.
Right now The United States for all intents and purposes is an oligarchy. Everybody saw how the financial sector in the economic meltdown controls governments. Massive bailouts in the United States and now in Europe and the inability of governments to break up or reign in majour institutions that were "too big to fail".
The Tobin tax and/or taxes like it are the best means to bring these companies to heel and to balance the budget without massive cuts to services. It's time for the people once again like they have countless times in history to take back their economic lives.