As I recall, P. Hanson had an idea for a flat tax of some sort on financial trading, as a replacement for income and a host of other taxes, and was pilloried for it.
I've always wondered though, could it work? Could a fixed tax on every transfer of funds by anyone, no exceptions, really harvest significant sums? Enough to replace other forms of taxation?
Here's a really interesting take on one aspect of that, pertinent to the current situation.
http://www.nytimes.com/2009/01/13/opinion/13herbert.html

A .25 tax on what the average person spends or saves would be far cheaper than the current regime, and the numbers involved at the top end of town would surely be golden, tax-wise?

Max,
The idea came from an architect she 'championed' it. At the time it was pillared.

I doubt it would work under the current corporate structures. tax havens, etc give net no tax so why would people who made an entire life from manipulating more would be able to change these habits/attitudes mindsets.
Even if you eliminated all deductions those able would say thanks but still hide the money on the argument it's only illegal if you're caught.

Sorry pal but capitalism as it's practiced encourages cheats and the the Western world have plenty of those.

The problem with this sort of punitive tax is that it discourages the activities that create the revenue stream it is supposed to produce.

The article you refer to does actually mention this. Sort of.

"The fees, though small, could amount to a big deal for speculators because in addition to the volume of their trades they often make their money on very small margins. Someone who buys an asset and then sells it an hour later at a one percent appreciation might feel quite pleased. He or she would be less pleased at having to pay a quarter-percent fee to purchase the asset in the first place and then another quarter percent to sell it."

The author fails to join the obvious dots here.

If the trades are made on small margins, then they will very quickly be taxed out of existence. And instead of raising "$100 billion annually", it merely adds another layer of taxation.

In the case of Australia, it would apply mostly to our Super Funds, reducing - even further - their attraction as a vehicle to save for our old age.

i think its a great idea,..those paying expensive lawyer's and accountants to avoid paying any tax at all dont.

but it makes basic sense..[those who use the money pay]..and everyone must pay...no egsemptions..its called a transaction tax..and simply goes on top of every transaction..[no egsemptions]..those who got money pay as they go

those huge monetary transphere [moving the same money arround to pretend twice the ammount of cash simply cant cheat..[see currently if you do it right..[you move your money os while you sleep]

[next day it magiclly is there..[but during the night it wasnt]...there is huge lies being played out..and the transaction fee may just stop some of them clever decievers playing games with our money

[games that are seeing us wear the total cost]..while they disappear it or make it appear..in virtual time instantly..[but it disappears just as fast]..at least with a transaction tax they pay their way

Pericles, I wonder how much though?
Let’s face the fact that it was all the games with financial instruments that caused the mess we’re in, so they’d be no loss. Wouldn’t it tend to simplify the approach of the big-money, simply to reduce it’s tax?
Superfunds could perhaps be granted exempt-status, but as I am no tax-expert, I’m unsure what long-term effect that would have. When you factor in the stock-market and business transfers, plus the money-market itself, surely trading wouldn’t slow that much?
Look at the numbers with banks and insurance etc lending to each other, .25% of that would carry quite a few zero’s!

Exam’, I think the whole point of this approach is to make it more difficult to cheat successfully, once it was in place there would be no exemptions, other than those legislated for, so they would seem to be stuck with paying it, for a change.
It seems attractive because it’s simple, which ultimately guarantees nothing. But isn’t the complexity and confusion of the current system exactly why the wealthy can evade/avoid so much tax?

A flat tax is a good idea since the poor who take on 2 jobs and work long hrs to secure a nest egg ,then get rewarded.The progressive system of taxation punishes hard work and achievement.

The role of Govt should not be to social engineer everything to the satisfaction of minority groups.

We need a lot less Govt/regulation and again let the individual take responsibility for their own destinies.

another of the vulgarities of the present system,is the bankfee, where any over the co0unter withdrawel is charged a set fee..[again i think it much fairer that a tiny percentage be charged..[on all transactions in or out

[say .0001 percentage point]..currently any mug drawing out as little as 20 dollars gets charged 2 buck's..[or +or-..10 percent]..clearly victimising the little guy..if we all had the same rules we could all faily share the burdon

take the 10 percent gst we all pay..[except those with tax egsemption[or who get the company [or a trust fund]..to pay their bills,..these are taxing times indeed

another thing that copmes to mind is wage isnt incme[legally speaking,..properly defined income is proffit derived from on selling an unimproved fungable..[a tradeable commodity]..ie no labour was expended in value adding..we dont have wage tax[we have income tax]and there really is a difference.

another fair tax was death duties[many people never pay tax in life,so fairness indicates death duties are fair...noting trust funds and corperations dont die..[yet have the right of persons,..

thus in all fairity should be time limited to equate to real personhood..ie die..[or lose their person status under law]..there have been dioboligal machinations by dead corp-orations under the acclaimed legal standing of personhood, so much so that people have lost the rights and dead corperations have gained govt favour

but for now i would like to leave the debate with the big..[fair]concept of a low,fixed proportunate transaction tax..[in lue of income/gst taxes], fair bankfees and duties for corperations will come next..

but what govt will give..[return fairity alone,it must be done world wide..[overnight]..say at the next g20?..ratified at joint sittings like they did the other shananigans

Maximillion

I agree with you, I can see merit in the idea of a transfer tax, if as Baker claims, it would help curb speculative transactions and 'non-productive activity'.

Pericles

"The problem with this sort of punitive tax is that it discourages the activities that create the revenue stream it is supposed to produce."

A transfer tax would discourage short term speculative investment which would surely be a good thing. It would only be 'punitive' for those making frequent speculative transactions. Those making long term investment in real productive capital wouldn't be penalised and this would provide greater economic stability and real capital growth.

"In the case of Australia, it would apply mostly to our Super Funds, reducing - even further - their attraction as a vehicle to save for our old age."

Super funds should be long term investments. The reason most people have seen the value of their Superannuation decline is that most funds managers have been investing for quick returns and have come unstuck with the collapse of Wall Street. I think the transfer tax as outlined by Baker might actually help guarantee our Super to a much greater extent than is currently the case.

lest we forget currently super gets 15 percent tax GOING in..[and again 15 percent comming out..[how can 1 percent comming out make less super]..lol..those who pove the current disparity..love the current system...

likely their family trust pays for and owns everything..[family trust began as the means to avoid death duties, but now has become an art form to avoid paying tax on anything..time to at least tax their transactions

Well I have always thought a flat transaction tax would be worth a go.

As said, there is simply no way to avoid it other than to deal exclusively in cash, and nobody, to any large degree does that.

It should however be collected by the banks and banks only. When you draw money from the bank or use your EFTPOS card, you pay. When the retailer or any other recipient of your money deposits money into the bank, they pay. When any
money either enteres or leaves a bank the tax is paid.

It realy does sound quite simple.

Accountants would hate the idea as nobody would need one as you would have nothing to claim as you have not paid anything other than the flat .25%.

Max
You're right it might net some medium players but the big tax avoiders don't pay tax now and it has nothing to do with deductions etc or artificial schemes the problem is with corporations money speculation and transient implements etc that the big con jobs are done.

The 'olden days' mini mainframe computers were an example

Licenced from US (profit)Boards made in US sold to Eire (profit); the boxes are then fitted sold to Argentina power supplies added(profit); sold to a US holding co(profit)adds switches; Sold to distribution co add peripherals France (profit); then sold to distributor (profit)who buys in screens from Asia; compatible ROMS added here to get around local content laws under license(profit); add local software engineering (more Aus content) then sold to customer(profit).
The 25% on the Aus end sale profit is neg. International corps can arrange the profit margins to maximize national tax.

NOTE:
The drug corps have be sprung using this technique to inflate sale prices. I think there are laws against this but proving it is near impossible in some instances again cost of recovery is enormous and not always successful.The numbers involved are staggering.

Then there were a number of these corps who went into negotiation with the ATO under double taxation laws etc and the ATO had to accept lessor tax because it would have cost far more to go to court.

Then there's the tax haven dodges. It is a myth that a simpler tax system would result in more tax receipts just ease/less cost for corps. (staff costs etc.)

Exam', you seem to have missed the point, EVERY transfer of money would get the .25%, including all the clever instruments et. al.
Transfer pricing,(profit rip-off), money speculation, ownership bids, anything that involved moving money from one place to another would be taxed, no havens allowed, no "corporate rate", nada.

Max,

Pericles is correct. The few times any idiotic government has introduced a transaction tax, the transactions stopped almost immediately. Any transactions simply happened overseas and the net revenue was almost zero, but with huge consequences for the local financial institutions.

Anyone with even a smidgen of economics would recognize why no sane government has even contemplated it and only Pauline Hanson has been dumb enough to think it is a good idea.

A little harsh Democritus, but can you tell me which countries have replaced all other forms of Taxation with an all-encompassing transfer tax? That is what my original question was about, and as far as I'm aware there have been no examples of that.
If I was an economist I wouldn't be asking, how else am I to understand such things, so, how about explaining you're final statement to one simple person, in simple terms?

The only country that tried a transaction tax in recent history was Zimbabwe.

The resultant chaos saw even that intransigent gov repealing the legislation within a week. In the interim the banks and stock exchange closed. The resultant tax income to the gov was nearly zero.

Other than it generates almost no revenue, the fact that nearly all revenue would be paid by the man in the street who can't dodge the tax would mean that the more you earn, the less you pay.

In short, no gov has replaced all other taxes with a transaction tax, for obvious reasons.

Demo', again, you make unsubstantiated claims and offer no explanations.
Zimbabwe is no example of anything rational, the entire country is so corrupted and is almost a failed state it demonstrates nothing, sorry.
And again you talk of dodging the tax, impossible under the regime I proposed. And your "obvious reasons" are apparently inexplicable, since you don't.
Thanks anyway.

Democritus

"Anyone with even a smidgen of economics would recognize why no sane government has even contemplated it and only Pauline Hanson has been dumb enough to think it is a good idea."

There's a huge gulf between someone like Pauline Hanson and a respected economist like Dean Baker, who's demonstrated clearly a thorough grasp of our current financial mess and the measures required to extricate ourselves from it.

The fact you haven't even referred to his analysis indicates you're probably speaking off the top of your head, and using Zimbabwe as an example only confirms it. You need to do your research before mouthing off so strongly.

Contrary to your scathing dismissal, I think you'll find this is one of a raft of measures that Obama and other leaders will be considering. It's not just about revenue raising. It's about bringing some fairness and stability back into a broken system.

The Sheriff of Nottingham was Robin Hoods enemy ,who is Kevin Rudds?Flat tax is the most sensible taxation system ever devised.
It is fairer more transparent and would cost much less to enforce and monitor.
Economists,and tax accountants would become redundant .
The current system of punishing the working poor, who have no way to escape the PAYE system has to end.
The taxation bonuses for the rich are endless,agricultural investments,Family Trusts,Income splitting,negative gearing,Franked dividends,overseas investments plus 100 other ways to lessen the rich
tax burden.
At the other end of the scale, the Rudd government is currently spending $32 million a DAY on defence and billions more on overseas aid and needless billions on public housing that does not help "Honest Joe" taxpayer with a wife and kids and a mortgage.
I suggest we scrap personal tax , as we used not to be taxed in this manner, and most developing countries have no personal tax.
It was unfair on the British who were taxed sometimes at the highest tax rate of 19/6p in the Pound Sterling.
This allowed Hong Kong residents,and Arabs to purchase Hotels, Shops,etc in central London,as they enjoyed a Tax free income,
while British business people could never raise large amount of cash.Due to PAYE.
The same has happened in Australia over the last few decades,Overseas people have purchased top properties as they were not taxed in their country,and yet the struggling Australians were heavly taxed.
A tax of 25% on all transactions would put more money back in the economy as well as reducing the myriad of other taxes.
Parking Fines and payments,Local State and Federal levies,Council Rates.
The average earns $500 per week pays $90 in PAYE.
This amount may shock many but the vast majority of trades and factory employees who pay most of the Governmnets PAYE tax earn $500 per week ,so a couple have a take home income of $820 to pay for all the taxes I have previously mentioned.

Just take a $100 bill and track it.

First you draw it from the bank ,taxed! Then you spend it and the recipient banks it, taxed! The recipient withdraws it to pay a bill, taxed! The bill collector receivs it in their bank, taxed! Then they go out for dinner and the restaurant owner banks it, taxed!

I am of the opinion that it is at the very least worth a full blooded enquirey to find out if it will in fact work.

Let's face it, the next genertation is in for a very tough time if nothing is done.

re the club<<$100 from the bank..First you draw it from the bank,taxed!>>one quater of a $[25..cents[not a $2 withdrawelfee

<<Then you spend it and the recipient banks it,taxed!>>,..25 cents not 2 bucks=total banking fees 50 cents not 4 bucks

<<The recipient withdraws it to pay a bill, taxed!>>no withdrawelfee

<<The bill collector receivs it in their bank, taxed!>>less than the bank fee

<<Then they go out for dinner and the restaurant owner banks it, taxed!>>100 $ dinner taxed 25 cents [not 10 percent[10 bucks gst]

<<I am of the opinion that it is at the very least worth a full blooded enquirey to find out if it will in fact work.>>...yeah me too

It was my understanding that big business were the ones who stopped it in the first place, as this type of tax is unaviodable for them as they do not deal in cash.

Unfortunately though, bank fees are not a form of tax and as such I doubt they would be replaced by any such tax. Would be great though as I pay in excess of 20 grand a year in bank fees.

I sill think any inquiery is what is needed.

The ability of financial institutions to move financial instruments around means that the institutions can spread risk, for example, when you buy insurance for your business or car etc, your policy is an instrument, and can be on sold to other institutions. This enable insurers to spread the risk of large policies or many policies in a particular area. It also ensures that competition on rates is as open as possible, and the most competitive insurer can offer policies to more people than his financial reserve dictates.

If done properly, the man in the street will get his policy at a competitive rate where the profit margins are as small as possible.

A transaction tax will add .25% each time the policy is sold, and where the margins are only a couple of percent, this will effectively stop the on selling.

The net effect will be that you will only be able to buy your policies from a few major insurers at significantly higher rates.
The consumer would end up paying considerably more than the .25%.

The same goes for mortgages etc. These transactions are far from non productive.

Secondly, some instruments exist as "pledges" to buy or sell, and can be traded off shore instead of actually trading the instruments or shares etc. These off shore instruments cannot be taxed, and can easily take the place of the standard instruments.

Thus, the tax is easily avoidable, and has serious consequences, which is why it has never been taken seriously.

democratus its interesting your raising insurance..[and other instruments..[noting each must have a cash/book/asset/market value,..thus it seems rather simple that the houses of settlement[ie bankers/lawyers/accountants]..tax these transactions..[trades]as they occure]

it might slow the rash of securitised and underwritten..debt equity swaps...currently made into insured AAA..securities..[where your unredeemable debt is swaped for my unredeamable debt..[as if both had real asseted worth...getting lol..a bonus..as if it were a real trade

further re the underwriters of insurance..[the practice is to offest the insured burden[as well as share the prenium..[but it must be noted no amnmount higher than the insured ammount..is normally insured[thus the ammount offset..cant exceed the insured sum total...

regardless it is a non issue..compared to the day traders getting their tax free ride gambeling..on which stock will rise..or fall in the next micro second..[making/losing trillions from adrenilin charged addiction..to speculating others funds]...

at least their transactions tax..off sets the other taxes..the suckers putting their trust in legalised..[tax free]corp/stock gambling]..ie slave wage tax payers..are burdoned with currently

[while the elites trade their income under the cover of their family trust's..[or get paid in bulion..at an artificially low face value to avoid paying tax]..or as non residents..or any of the thousands of under the harbour type/tax avoidance scemes

UOG

You have many misconceptions:

Profits from transactions are taxed as capital gains,

Your tax reduction methods are known as tax evasion, and attract a jail term,

Banking houses make a profit on the transactions by underwriting them. However, the banks are making them more valuable by making them more secure. (ie. if the original debtor defaults you can claim from the bank) which is not a tax, but a value added component.

Insurers can sell much more insurance than they have the financial backing for by re insuring with the likes of Lloyd's etc who buy the policies at a fixed actuarial determined rate. There is no limit to how much they can sell if they are cheaper than anyone else and charge a small premium to the actuarial rate. Thus big companies are forced to compete with the smaller resellers.

This is similar to Telstra owning the lines, but being forced to allow others to sell services on the lines, and being forced to compete on price.

A transaction tax facilitates monopolies.

Democritus,
I agree with much of what you say, however, one must weigh up the advantages against the dis-advantages in many cases.

I don't know if a TT will be better over all, but, what I do know is that if we keep going down the same line as we are it will all fall in a heap one day.

We must come up with something and fast!

demockratiseus<<Banking houses make a profit on the transactions by underwriting them.>>oh right just like govt underwriting the banks by giving them govt bonds is underwriting the banks to charge us more bankfees

<<However,the banks are making them more valuable by making them more secure.>>just a the govt guarentee is underwriting the banks[and the govt bonds are counted as assets[and securitised into the maRKET TO CAPITALISE THE CAPITALISTS

<<(ie.if the original debtor defaults you can claim from the bank) which is not a tax,but a value added component.>>RIGHT I THINK IM GETTING IT .../WHEN THE BANKS..that arnt written under[underwrote]..like smaller banks/societies default the big underwritten banks take them over

rationalisation of the market place..where the big underwritten/banks eat up the..functioning capitalised smaller/banks..[read the wa banks rationalised...nearly sun corp as well..lol they conduct runs on the little guys..[while govt protects the big boys]

<<Insurers can sell much more insurance than they have the financial backing for by re insuring with the likes of Lloyd's etc who buy the policies at a fixed actuarial determined rate.>>>..ah right like the fed selling govt underwriting bond's..securitising them into assets

<<There is no limit to how much they can sell if they are cheaper than anyone else>>..or are protected from consumers withdrawing their funds[that some how dont collect ursury/intrest from the bankers using their customers funds for free[or rather only allowing them acces for fee]

<<and charge a small premium to the actuarial rate.>>like the big boys can..with the govt bonds underwriting their exclusive franchise...more than offset..by the govt issued bonds underwriting them..that yet gain ursury payable to the bond holder's..[ie the banks securities holder the fed reserve]that converts bonds into cash

<<Thus big companies are forced to compete with the smaller resellers.>>or is it the big..banks..out-compete the little..by govt advantage..[underwriting]..

given to the multinational fed cartel allowed its exclusive fed bank cartel franchise..to create money from nothing..[and charge ursury on it]..offsetting the fee..[or passing it on..to the fee paying con-sume-er..not only to fleece govt but the tax payers...for banks its win win...govt bonds and ursury and bankfees too