The United States and Britain voiced disagreement Saturday over a proposal that would impose a new tax on financial transactions to support future bank rescues.
Prime Minister Gordon Brown of Britain, leading a meeting here of finance ministers from the Group of 20 rich and developing countries, said such a tax on banks should be considered as a way to take the burden off taxpayers during periods of financial crisis. His comments pre-empted the International Monetary Fund, which is set to present a range of options next spring to ensure financial stability.
But the proposal was met with little enthusiasm by the United States Treasury secretary, Timothy F. Geithner, who told Sky News in an interview that he would not support a tax on everyday financial transactions.
What a disappointment Gorden Brown is turning out to be. This is a very bad idea that he has come out behind, and his timing could not be worse. Fortunately, even the Russian finance minister spoke against it. In any event, read it all–KSH.
CANADIAN FINANCE MINISTER JIM FLAHERTY
On transaction tax:
“That discussion is worthwhile having, in the context that financial institutions if they get in trouble should bear the consequences of their own demise. It’s one of the ideas that’s on the table, but is not particularly attractive to me as finance minister of Canada. We have been a government that has been reducing taxes.”
INTERNATIONAL MONETARY FUND CHIEF DOMINIQUE STRAUSS-KAHN
“We can’t go on with a system where some individuals take risks that finally all taxpayers, like you and me, have to pay for. The financial industry has made such big innovations that it is probably impossible to find a transaction tax that will not be avoidable by potential taxpayers. So it will be based not on transactions but on something else.”
He said there were two possibilities for a bank sector tax, including a “possible windfall tax for 2009, a one shot thing.”
The other would be a more long-term tax.
“I didn’t plan to talk about this (today), but as Gordon Brown unveiled it, I decided to … I am very happy to have the support of Gordon Brown on this.”
http://uk.finance.yahoo.com/news/comments-from-g20-finmins-c-bankers-meeting-reuters_molt-c691ffae1c88.html?x=0
Geithner mentioned some sort of tax on [b]risky[/b] investments which would fund “bailouts” instead of the general fund. It sounds a bit like the idea behind FDIC.
“Financial transactions” is a pretty broad category; most do not involve the sort of risk that would require a national bailout. For example, the money paid to me from various pensions, annuities and IRA-MRDs are “financial transactions” involving thousands of dollars each month. The only “risk” is in the payers going belly up and the transaction not occurring. On the other hand if those payers had to pay “transaction taxes” on their “risky” investments from which the payments are made there might be two salutary consequences. First, the tax might discourage pension fund, insurance company and mutual fund managers from speculating with questionable investments, since those transactions become more expensive and less profitable. Second, the tax might stabilize the markets because those who substitute Wall Street for Los Vegas casinos would also find their game more expensive and less rewarding.