Riding Through the Glen?

by Andrew Stuttaford

Via the New York Times:

They call it the Robin Hood tax — a tiny levy on trades in the financial markets that would take money from the banks and give it to the world’s poor.

And like the mythical hero of Sherwood Forest, it is beginning to capture the public’s imagination.

Driven by populist anger at bankers as well as government needs for more revenue, the idea of a tax on trades of stocks, bonds and other financial instruments has attracted an array of influential champions, including the leaders of France and Germany, the billionaire philanthropists Bill Gates and George Soros, former Vice President Al Gore, the consumer activist Ralph Nader, Pope Benedict XVI and the archbishop of Canterbury.

“We all agree that a financial transaction tax would be the right signal to show that we have understood that financial markets have to contribute their share to the recovery of economies,” the chancellor of Germany, Angela Merkel, told her Parliament recently.

As a reminder, here’s what Britain’s finance minister George Osborne had to say about this tax:

There is not a single banker in this world that is going to pay this tax. There are no banks that are going to pay this tax. The people who will pay this tax are pensioners”.  

That’s an exaggeration, but nevertheless a heavy proportion of this tax would be levied on savers, making it much more of a Sheriff of Nottingham tax than anything that Robin of Sherwood would endorse.

The Times quotes Glenn Hubbard (chairman of the Council of Economic Advisers under George W. Bush) making a similar point:

“Such a tax isn’t really going to get at the banks,” added Mr. Hubbard, who is now an adviser to the Republican presidential candidate Mitt Romney. “It’s going to hit the people who own the assets that are traded,” like investors.

It would be good if the tax’s “influential champions” would have the honesty to admit that fact.

As for the tax being “tiny,” it is indeed small in terms of the overall value of the transactions concerned, but as the Times duly notes, opponents of the tax are highlighting the fact that it could represent a very substantial addition to current dealing costs. They are right to do so. It would.

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