Robin Hood Tax

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Robin Hood TaxThe Robin Hood Tax is a collection of financial transaction taxes similar to the Tobin tax, proposed in the United States. The Tobin tax, suggested by Nobel economist James Tobin, was a tax on all spot currency conversions and designed to penalize short term forex trades. The Robin Hood Tax is broader and would add a tax to a variety of financial transactions from currency exchange to stock trades to bond sales. It would also include a levy on banks and other financial activities (called a FAT tax).

Why Robin Hood? He stole from the rich and gave to the poor. This tax would steal from the rich (bankers) and give to the poor (social programs) too and the idea has the support of over a thousand economists.

How much would the tax be? On transactions like stock trades and the like, it’d be 0.05%. On a purchase of $1,000 in stock, you’d expect to pay 50 cents. If you’re a savvy buy and hold type, you won’t even notice it. The real money makers are those mega-traders who use arrays of computers and transact in the tens and hundreds of millions of dollars each day.

What do you think of this idea? I love it.

(Photo: Oxfam)

{ 45 comments, please add your thoughts now! }

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45 Responses to “Robin Hood Tax”

  1. Wil says:

    Almost half of the people in this country pay no taxes. I am in favor of a flat or consumption tax, but this is a targeted tax that just loads more burden onto the folks that are already paying the taxes.

    • mannymacho says:

      I think the statistic was that 45 percent of the people pay no federal income tax. They still pay state income, social security, and sales taxes, in some cases comprising a decent chunk of their total income.

      In the absence of real tax reform in this country, I think I’m with Jim on this one – this could be a good possibility.

      • billsnider says:

        People like you keep saying “tax reform”. What does that exactly mean and how will this solve the deficit problem?

        Bill Snider

    • Courtney says:

      Actually, hedge fund managers don’t pay much in taxes. They make their billions within the funds, but instead of selling shares to generate profits (which would be a taxable event) they just take tax-free loans against the funds and pay themselves interest.

      Even when they DO pay taxes, they pay them at the LTCG rate (15%) instead of the income tax rate. In 2010 the top hedge fund manager made more money in AN HOUR than the average US worker makes in their entire lifetime. I support a Tobin-like tax.

      • Dan says:

        They make so much money, it’s ok to rob them.

        My neighbor have three cars. That’s above average. Let’s pass a law to tax every third car.

        • zapeta says:

          Who is being robbed? It’s a tax. If you don’t like it, you can either avoid doing things that trigger the tax or vote for people who would vote against the tax. The people who this tax is targeting can easily pay it.

    • cubiclegeoff says:

      Don’t see how this could be a burden to most people. The tax would really impact the high-volume traders, but not really others. I don’t see this as being a bad idea, and I’m surprised it hasn’t been done already.

  2. Dean says:

    Sounds just like the taxes on the telecommunication industry that got passed along to us in incomprehensible “fees” and “taxes” added to our phone bill. Guaranteed, this will get passed along to investors small and large, and affect the likes of us that trade with discount brokers. A flat $5 trade is now, well, more complicated. A $5000 investment that used to be $5 is now $10, ditto for the sale.

    Also, this adds more processing and tracking to collect the tax, when our tax code needs less complexity, not more.

    Instead of this, if you’ve got to raise taxes, why not phase out some other complicated tax deduction like the sales tax deduction.

    Better yet, overhaul the whole thing… Or better still, throw out the politicians that can’t stick to a budget!

  3. Texas Wahoo says:

    “If you’re a savvy buy and hold type, you won’t even notice it.”

    I imagine most investors would notice is not as a 0.05% charge every time they buy shares, but as a cost of owning mutual funds/etfs. While finding out exactly how such a tax would work is somewhat difficult from the website you’ve linked, I imagine each mutual fund/etf would end up paying the tax on every trade they make?

    • James says:

      I’m with Wil. I’m not a banker, but I do invest a portion of my income into a mutual fund every pay check. How is it ok to steal from the rich? Stealing from anyone is wrong. I don’t understand why people want the rich to pay for everything. If you are legitimately in a dire situation, like you are physically handicapped and have no one to help take care of you, then yes the government should step in to keep you from dying from lack of care, but if you are physically capable of working and healthy why should the tax payers be financing your housing, food, and children? You decided not to work, not get educated, have children, etc. There are hundreds of charities and churches that will help you get on your feet if you are willing to work for it, it is not the job of the government.

      • cubiclegeoff says:

        This is far from stealing from the rich. As for your argument of people basically not trying hard enough, that’s not a good argument, and never has been. There are a variety of reasons why people are in the situation they are in, and it’s never clear cut in how to help them, or what help they need. There are plenty of people right now that are having a hard time and have been trying to find jobs, taking extra classes to gain new skills, and still are not making it. And there just aren’t enough church groups and non-profits to help all these people.

        • Dan says:

          Nothing wrong with asking for help. Nothing wrong with give help.

          You are talking about taking something from other people by force because you think they have more than enough. That’s not stealing/robbing?

          • cubiclegeoff says:

            It’s not taking anything by force. It’s requiring that people be a part of society. If they don’t want to be a part of society, they’re welcome to go elsewhere.

          • Texas Wahoo says:

            “It’s not taking anything by force. It’s requiring that people be a part of society. If they don’t want to be a part of society, they’re welcome to go elsewhere.”

            Except that the U.S. is making it harder and harder to do so, even for those who choose to live elsewhere.

      • Scott says:

        To play devil’s advocate, why should the government step in if you are are in a “dire situation”? Why is that the responsibility of the government and the burden of the taxpayers? I’m not saying we shouldn’t, but I don’t know that it’s a sound argument the way you phrased it.

        • cubiclegeoff says:

          Simply, if the government doesn’t step in, who will? you could also ask, why does it matter? Let the people figure it out themselves. If they end up homeless and dead, not our problem. Except it would be our problem. If people get to the point of not having a place to live, or food to eat, it could easily increase crime against people that have those things. Same reason why public education paid for by local taxes on all people is generally supported. There is a benefit to all when we have an educated population.

          It would be nice to think that our country is full of generous people that will give to charities and churches and other nonprofits to help people in need, but this just doesn’t happen to the extent necessary. Survival of the fittest doesn’t really work in a civilized society.

  4. As long as the small investor doesn’t feel it, I’d be fine with it. Problem is, big banks aren’t going to take the hit – they’ll simply add in new fees to offset the transaction taxes associated with buying/selling inside mutual fund offerings, resulting in new (or higher) annual brokerage fees, etc. passed on to the little guys.

  5. scott says:

    and this is the post that made me unsubscribe from this blog. By what right can you lay claim to the fruits of others’ labour? Has it not occurred to you that wealth is created, not redistributed? Charity is an individual obligation, not a government duty. Why not just work on reforming our corrupt and unfair tax system rather than proposing additional taxes on the productive sectors of our economy?

    • Shirley says:

      I do agree with you that charity “should be an individual obligation” but in today’s world there would be very little to serve a great many.

      As for unsubscribing from this blog because of another person’s opinion, do remember that an opinion is just that person’s feeling or thought (just like yours belongs to you) and is certainly not a mandate for everyone. The blog is made up of each poster’s opinion and from the whole you take away what feels right to you. You do yourself a disservice by refusing to even listen to an opinion other than your own without discussion.

      • scott says:

        I’m unsubscribing because this blog is filled with more and more politically charged crap and less and less personal finance advice and tips.

        I get plenty of other people’s opinions every day. I am inundated from all sides by virtue of living in southern California and having mainly friends who subscribe to contemporary Democrat Party ideology. I don’t need to receive my daily dose of politics and poorly formed economic theory from a personal finance blog that was formerly more relevant to me.

        As far as your countrymen’s donations, we are the most charitable country in the world:

        • JJ says:

          It’s no better living in Ohio and being a Democrat. Believe me. At least you don’t risk being shot for your political views.

  6. The last thing we need is a tax on saving and investing. Taxes on capital do nothing but hurt investment. This is just another way liberals have thought of to redistribute wealth. We need more savings and investment not more revenue for a government that spends at 24% of GDP.

    • cubiclegeoff says:

      Interest on savings and capital gains and dividends are already taxed, so saying that we shouldn’t tax investing or saving is irrelevant since we already do that.

  7. freeby50 says:

    Is the goal to just raise some tax revenue off of financial transactions? Kinda sounds like it.

    The Robin Hood Tax idea seems based out of the U.K. If someone were to seriously propose something like that here in the US then I think they should find a different name or marketing spin on it.

  8. Mark says:

    What a stupid post. I am unsubscribing as well.

  9. mark says:

    Ragnar: “. . . [Robin Hood] is not remembered as a champion of property, but as a champion of need, not as a defender of the robbed, but as a provider of the poor. He is held to be the first man who assumed a halo of virtue by practicing charity with wealth which he did not own, by giving away goods which he had not produced, by making others pay for the luxury of his pity. He is the man who became a symbol of the idea that need, not achievement, is the source of rights, that we don’t have to produce, only to want, that the earned does not belong to us, but the unearned does. He became a justification for every mediocrity who, unable to make his own living, had demanded the power to dispose of the property of his betters, by proclaiming his willingness to devote his life to his inferiors at the price of robbing his superiors. It is this foulest of creatures – the double-parasite who lives on the sores of the poor and the blood of the rich – whom men have come to regard as the moral idea.” “. . . Do you wonder why the world is collapsing around us? That is what I am fighting, Mr. Rearden. Until men learn that of all human symbols, Robin Hood is the most immoral and the most contemptible, there will be no justice on earth and no way for mankind to survive.”

    The Pirate Ragnar Danneskjöld
    From Ayn Rand’s Atlas Shrugged

  10. Don C says:

    You won’t even notice it? What about the mutual funds that we invest in that do make trades, now their expenses go up and our returns on our 401k and otehr savings goes down.

    Once again, I don’t think we have a revenue raising problem, we have a spending problem. This would only make it worse. We don’t need more social programs, we need more people working to create their own wealth. Not more people with their hands out taking other people’s wealth.

    • billsnider says:

      Well said.

      Sign me up.

      Bill Snider

    • cubiclegeoff says:

      I think the added amount to a management fee won’t be noticed by most people. I don’t think it will be a big deal.

      As for people creating their own wealth and working, great. But social programs are necessary for many of these people do to that. Job centers are necessary, educational programs, and then programs that help people stay on their feet so they can improve themselves. As a commenter on another post has said, saying we having a spending problem, not a revenue problem is like saying we have an exercise problem, not an eating problem.

      As for people not taking someone else’s wealth, I agree. I work hard, as do many working class professionals, and I want my share that’s due to me. I’m sick of my wealth being taken by CEOs and top executives. There’s no reason that their wealth over the past decades has skyrocketed, but people like me stagnate. I want my wealth back that they’ve taken from me.

  11. Travis says:

    I’m all for it, but I generally favor in increase in taxes.

  12. Travis says:

    *in should be an

  13. MoneyNing says:

    This would affect the mutual fund industry, and it might even affect index funds because many of them use complicated derivatives to mimic the index they track so it will affect the average joe through higher fees.

    A new tax just adds to the complications and that’s why our tax code is 60,000 pages thick.

    For a country that prides itself in being a leader of capitalism and freedom, our government dictates way too much of its citizen’s behavior through tax consequences.

    Any additional tax schemes should not be introduced.

  14. OrchidGirl says:

    Given the costs of untangling messes caused by high volume traders (think the flash crash) and the difficulty in effectively regulating it, I think it is reasonable to impose a fee or tax. Heck some economist have spoken out against automated trades period. Taxing might be a better solution than a total ban.

  15. Strebkr says:

    I think I would prefer a consumption tax like the VAT, BUT I would need assurances that there would never be another tax put on top of that. I don’t want to add more taxes without taking away others.

  16. SoonerNATX says:

    two things:
    1)this is a horrible idea. Explain to me how someone who doesnt work deserves the money of someone who does. This isnt politics this is common sense. If this is the case, Jim, i want to quite my job and be given 30% of all revenue generated by your site. How does that sound? (i like THAT idea).
    by attacking investments you are attacking every single person who works for a living. not only that but your attacking the middle class not the upper. the upper class will find loopholes and pass it off to the middle.

    2) since when has ANY idea been executed by the government that achieves the spirit of the idea that was initially thought? IT HASNT! so WHY would it start now?

  17. szamp says:

    It’s very interesting that “thousands of economists” support the idea that a portion of the population has the right to the fruits of the work of the remaining population. It reminds me of a cast system or even slavery. If you want less of something, tax it. If you want less investment, less products of a certain type, less jobs, just tax it. Taxing takes part of the incentive for doing something. What happens eventually is that the government has to establish a monopoly to offer a product or service that offers no profit to anyone who wants to provide it and historically, monopolies offer the worst in quality and customer service.

  18. zapeta says:

    I think its amazing how many readers of this blog complain about government spending and insist there is no way to increase revenue when tax rates are at historical lows. The fact is that some spending needs to be cut, we could certainly do without two wars and excessive military spending, but I don’t think the budget should be balanced on the backs of those at the bottom of the ladder. From where I stand near the bottom of the ladder, there isn’t much more that the people on the bottom can take. There are a lot of people who work hard but depend on the social safety net that everyone is so keen on cutting. Frankly, it is in the best interest of the wealthy to make sure these programs stay in place and well funded. If the poorer majority of the country finally realize that programs they depend on are being cut primarily for the benefit of the wealthy they are not going to take it lying down.

    My opinion is that tax code should be changed to close some of the loopholes that corporations can use to reduce their tax liability, and the Bush tax cuts should be allowed to expire. These actions, along with targeted spending cuts would go a long way to fixing our budget problems and making sure that no group, rich or poor, has to bear the entire burden of fixing the budget.

  19. Mark says:

    Well besides social security and medicare (read retirement and health insurance) which everyone pays, though not equally or proportionately, the top 40% of Americans pay 99% of the federal tax burden while the bottom 40% actually receive a refund. This would never pass because it would affect the middle class’s ability to invest in mutual funds and index funds, forcing them to purchase individual stocks where fees are high relative to purchase price.

    I am shocked that a site dedicated to frugality and living within your means is advocating a convoluted taxation system whose consequences are almost impossible to forsee. Just implement a flat tax, lower corporate taxes, (read the amount business pass on to consumers), cut regulatory disincentive measures and continue a regressive savings structure that benefits and encourages lower to middle class savings. Tell the government to stop trying to “earn” more revenue on the backs of American workers and simply cut spending, become more efficient, and let loose the machine of American industry. That is what this type of site is about.

  20. Ola says:

    Sweden tried the Robbing Hood tax. It only lasted a couple years after it destroyed too many jobs. Bonds for example had a rate of only 0.03 percent. Trading of bonds fell 85 percent the first week, bond futures trading dropped 98 percent, bond options stopped trading entirely. The Swedish government could not raise money. Like, duh, like you know. The Swedish government had predicted revenue from bonds alone would raise 1.5 billion kroner. They got just over 3 percent of that. Considering the loss of other types of tax revenue because of the tremendous drop in financial, economic activity and job losses, the actual tax revenue was negative. The EU is considering such a tax. Sweden is defiantly unwilling to ever try that again. The proposed 0.05% rate of course is only to better get the tax accepted. These same people propose increasing the rate to 1 percent. The average investor will lose one half of their retirement fund from loss of compounding over a working lifetime.

  21. JJ says:

    Can’t believe how many here equate taxes to stealing. It is an honor an a privilege to pay taxes in the United States of America. It is the least we can all do in support of our great society.

    You can disagree with the tax if you like, but stealing? Come on.

    • Ola says:

      Taxes are something worse than stealing. If something is stolen from you, it is temporary. You can work for more to replace what was lost. With taxes, everything you make and have is constantly being taken and you can never work hard enough to replace what was lost. The harder you work, the more that is taken. Rather ironic that you are the one that goes to jail by preventing your property from being taken by not paying every dollar of taxes. At least with a robber, you have a chance at protecting your property. Miss a property tax payment and your house and entire life’s work gets taken from you to be divvied up by a few thugs in power. Towards the beginning, a fraction of a percent of GDP was being consumed by government. Now it’s 50 percent. And it’s still not enough.

      • JJ says:

        Oh come on now. Our current tax regime is so riddled with exemptions it is incredibly easy to get ahead if you earn any money at all. I’m able to shelter more than the average family makes in a year (the average family makes around 52k a year)…

        I shelter…
        46,000 in a non-prototype retirement account for self employed.
        6,150 in an HSA.

        In addition, I only pay 15% on capital gains, occasionally earn interest on tax free munis, deduct the interest I pay on my mortgage, etc.

        This makes my effective rate somewhere between 15 and 20%. It’s a steal alright! I pay next to nothing for the infrastructure I’ve used to accumulate wealth.

        The problem is… the marginal rates don’t go up high enough and there are too many shelters.

        I could go along with some sort of flat tax so long as they eliminate ALL shelters (no 401k, no ira, no tax exempt muni’s, no hsa, tax capital gains at whatever the flat tax rate is (income is income)). Get rid of the cottage industry set up to handle all these shelters.

        Now if you’re saying that you can’t get by after taxes if you don’t make jack, then I can go along with that. If you’re supporting two kids on a 52k salary, then yah, taxes are tough (and I agree… those that make more should pay more in taxes). In a de facto sense, the guy making 52k a year has no chance to take advantage of the shelters I use since he doesn’t earn enough money to fully contribute to them.

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