Would a Financial Transaction Tax Affect Financial Market Activity? Insights from Futures Markets
This report examines the potential effects of a financial transaction tax (FTT) on U.S. futures markets, suggesting it could reduce trading volume, increase volatility, and fail to generate expected revenue.
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| Quick Facts | |
|---|---|
| Report location: | source |
| Language: | English |
| Publisher: | CATO Institute |
| Authors: | Jot Yau, George H. K. Wang |
| Geographic focus: | United States |
Methods
The research method involved reviewing theoretical and empirical literature on FTTs, analyzing the potential impact of such a tax on market activity, and applying findings to U.S. futures markets. The study also critiques revenue estimation methods used by proponents of FTTs.
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Key Insights
The study reviews literature on financial transaction taxes (FTTs) and analyzes their possible impact on U.S. futures markets. It suggests that an FTT could decrease trading volume, increase bid-ask spreads and price volatility, and drive business to untaxed foreign markets. The report also critiques the methods used to estimate tax revenue from FTTs, arguing that they often overstate potential revenue by not accounting for changes in market activity.
(Generated with the help of GPT-4)
Additional Viewpoints
Categories: English publication language | United States geographic scope | bid-ask spread | financial transaction tax | foreign markets | futures markets | market competitiveness | market liquidity | price efficiency | price volatility | tax revenue | trading volume