1,000 economists may have signed this letter but that\’s just 1,000 economists who are wrong.
Even at very low rates of 0.05% or less, this tax could raise hundreds of billions of dollars annually and calm excessive speculation. The UK already levies a tax on share transactions of 0.5%, or ten times this rate, without unduly impacting on the competitiveness of the City of London.
So let us address just this one point they make, about stamp duty on share purchases.
What actually is the effect of this?
Stamp duty is thus shown to depress share prices, particularly for firms whose shares are
frequently traded. This may increase the cost of capital faced by firms, which in turn could have
negative repercussions on investment. Stamp duty also distorts the signals that share prices send
about the profitability of firms, as share prices are also affected by expectations of future
turnover volumes and stamp duty rates. Our results show that these effects are real and
measurable. This finding is important both in discussion about the benefits of abolishing stamp
duty, as well as for the wider debate on the merits of transaction taxes, including the
controversial “Tobin –tax”. It remains open, however, whether the negative effects of alternative
sources of tax revenue would be smaller than those of stamp duty.
Oh, you mean that stamp duty, by depressing share prices, makes capital more expensive for companies? More expensive capital thus meaning less investment, thus lower productivity of labour and so lower wages for the workers?
And, of course, lower returns for pension funds?
And as to the wider tax, we have the IMF\’s considered opinion:
Its real burden may fall largely on final consumers rather than, as often seems to
be supposed, earnings in the financial sector.
And as they go on to note, the more widely the tax is imposed, the more internationally, the more this becomes true. The incidence of the tax is not on the banks or the banksters, it\’s on you and me.
1,000 economists may have signed on to this but that\’s just 1,000 economists who are wrong.
Our list of economists does, after all, include Richard Murphy. Yes, a retired accountant from Wandsworth is included in this list of the international economists. And Prem Sikka, a Professor of Accounting. Not really inspiring great confidence in the rest of the list, is it?