Tags: Fiscal Times | Thoma | Financial Transactions | Tax

Fiscal Times' Thoma: We Need Financial Transactions Tax

By    |   Monday, 20 July 2015 06:00 AM

Most would agree that average Americans suffered much greater harm from the 2008-09 financial crisis than the Wall Street executives who helped make it happen.

"Is there a way to change this?" writes Mark Thoma of The Fiscal Times. "Can we shift more of the cost of financial meltdowns to the financial industry? Yes we can, and one way to do this is to implement a financial transactions tax."

Such a tax would force financial institutions to pay for their risk behavior, he argues. "While taxes are often distortionary, in this case the tax would improve the efficiency of financial markets by forcing the industry to consider the full cost of trading in risky assets."

Thoma shrugs off the complaint that a transaction tax will curb investment and limit economic growth. "To the extent that long-term investment does fall, it is eliminating excessive risk-taking and that is a positive rather than a negative for the economy," he says.

But one argument Thoma doesn't address is that a transaction tax on financial institutions would simply be passed on to their customers. So you and I would still be on the hook.

Elsewhere on the tax front, Warren Buffett's gargantuan contributions to charity don't just help to make the world a better place, they also serve to reduce his tax liability, says San Francisco-based tax attorney Robert Wood.

Buffett recently announced a donation of $2.8 billion worth of Berkshire Hathaway Class B shares to charity this year. Recipients include the Bill and Melinda Gates Foundation and foundations set up by Buffett family members.

So, "why donate stock rather than cash?" Wood asks on Forbes.com. "When someone donates stock, the donor gets a charitable contribution deduction based on the fair market value of what is given."

But the value of the shares is undoubtedly much greater than it was when Buffett received them, so he's getting credit for the stock appreciation without having to pay capital gains taxes.

"Donating appreciated stock is far better than selling the stock, paying tax on the gain, and donating the cash," Wood notes. And charities don't have to pay any capital gains taxes if they sell the stock Buffett gives them.

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Most would agree that average Americans suffered much greater harm from the 2008-09 financial crisis than the Wall Street executives who helped make it happen.
Fiscal Times, Thoma, Financial Transactions, Tax
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2015-00-20
Monday, 20 July 2015 06:00 AM
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