Forbes Cites Review in Ongoing Debate on Stock Trading Tax

A Tulane Law Review article evaluating possible tax reforms in the wake of the financial crisis was cited by a Forbes article reporting on legislation intending to tax stock transactions. Forbes writes that Congressman Keith Ellison introduced a bill that would add a tax of 0.5 percent onto the sale of stocks, 0.1 percent on bonds and 0.005 percent on derivatives or other investments. "To put this in a buyer’s frame of mind, when an investor purchased $10,000 in stock shares, the financial transactions tax would tack on an additional $50," the article explains.

The bill is not without controversy, with similar legislation failing in the past and Forbes noting that such "Robin Hood" type taxes can backfire.

Forbes turned to Foolish Revenge or Shrewd Regulation? Financial-Industry Tax Law Reforms Proposed in the Wake of the Financial Crisis, a Comment authored by Review alumnus Richard T. Page, to explain why a financial transactions tax may not be beneficial.

In his Comment, Page wrote that taxes should discourage undesirable behavior. Taxes increase the cost of engaging in certain behaviors, explained Page, and because stock investment is a desirable behavior, it should not be discouraged.