The report argues:
- A financial transactions tax could likely raise over $105 billion annually (0.6 percent of GDP) based on 2015 trading volume. This estimate is roughly in the middle of recent estimates that ranged from as high as $580 billion to as low as $30 billion.
- The full amount of this tax would be borne by the financial industry, and not individual holders of stock or pension funds and other institutional investors. Evidence suggests that trading volume is elastic with respect to price, meaning that any drop in trading volume resulting from the tax would reduce costs for end users by a larger amount than the tax would increase them.
- It is reasonable to believe that the industry would be no less effective in serving its productive use (allocating capital) after the tax is in place. This means that one of the primary effects of the tax would be to reduce waste in the financial sector, reducing costs while having little or no effect on its principal purpose: to allocate capital effectively.
- The revenue raised through an FTT would easily be large enough to cover the cost of free college tuition (among other social programs), although if nothing were done to stem the growth rate of college costs, it would eventually prove inadequate.
The report also notes that the financial sector is the main source of income for many of the highest earners in the economy. This means that downsizing the industry through an FTT could play an important role in reducing income inequality.
Senator Elizabeth Warren at Banking Hearing on Consumer Finance Regulations
While it is reasonable to subject a reform agenda to the 2008 test, this should be at most a side issue. After all, it is virtually certain that our next crisis will not look our last crisis. Financial reform first and foremost is not about preventing the last crisis, but rather about designing a financial system that more effectively serves the rest of the economy.