Paul Krugman outlines his support for a US Robin Hood Tax

Nobel Prize winning economist Paul Krugman has today reiterated his support for a Robin Hood Tax on financial transactions.

Writing in the New York Times, Krugman suggested a tax on both financial transactions and high incomes as a way of raising revenue.

Speaking about a Financial Transaction Tax, Krugman said:

“And then there’s the idea of taxing financial transactions, which have exploded in recent decades. The economic value of all this trading is dubious at best. In fact, there’s considerable evidence suggesting that too much trading is going on. Still, nobody is proposing a punitive tax. On the table, instead, are proposals like the one recently made by Senator Tom Harkin and Representative Peter DeFazio for a tiny fee on financial transactions.

“And here’s the thing: Because there are so many transactions, such a fee could yield several hundred billion dollars in revenue over the next decade. Again, this compares favorably with the savings from many of the harsh spending cuts being proposed in the name of fiscal responsibility.

“But wouldn’t such a tax hurt economic growth? As I said, the evidence suggests not — if anything, it suggests that to the extent that taxing financial transactions reduces the volume of wheeling and dealing, that would be a good thing.

“And it’s instructive, too, to note that some economies already have financial transactions taxes — and that among those who do are Hong Kong and Singapore. If some conservative starts claiming that such taxes are an unwarranted government intrusion, you might want to ask him why such taxes are imposed by the two countries that score highest on the Heritage Foundation’s Index of Economic Freedom.”

Read the full article here: http://www.nytimes.com/2011/11/28/opinion/krugman-things-to-tax.html