Bernie Wants A Transaction Tax

I have written about the transaction tax before.  It’s a big want among socialists.  Bernie Sanders is campaigning on it.  So is Elizabeth Warren.  The Chicago Teachers Union wants it locally.

It’s a terrible idea and corrosive to any lower income or middle class person that wants to build wealth.

The WSJ had an editorial about it today, and this jumped out at me.  It was written by a former CFTC commissioner, Fred Hatfield, who is a Democrat.

According to a study of Mr. Sanders’s proposed FTT by Georgetown economist James Angel, the tax could reduce retirement savings by as much as 8.5% over a typical worker’s lifetime. These significant losses for ordinary investors may be one reason why the Obama administration’s economic team, which considered proposing its own FTT, ultimately decided against it.

I haven’t seen how they quantified the study.  If it was purely on the implementation of the actual tax, the 8.5% decrease in retirement savings is too low.  A tax will widen bid/ask spreads and decrease the available liquidity in the market which will be far more costly than the tax alone.  It will also force market makers and hedge funds to consolidate since larger organiztions could better afford the tax.  It is sort of like internet sales tax.  Amazon can pay it.  Small mom and pop shops see it as a larger burden.

There are plenty of ideas being bandied about today that are horrible.  They have no real economic logic to them.  They are misinterpreting what an “inalienable right” is.  Seeing younger people gravitate to these sorts of ideas let’s me know that our educational system is failing us as a nation.