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Clinton Proposes High-Frequency Trading Tax

by Mike Godfrey,, Washington

12 October 2015

Hillary Clinton has suggested the introduction in the United States of a financial transactions tax (FTT) on high-frequency trading (HFT), which would not be as broadly-based as the tax already proposed by her opponent for the Democratic Party presidential nomination, Senator Bernie Sanders (I – Vermont).

To feature as part of a package of financial and capital market reform proposals, aimed at "reducing the risk of future crises," Clinton's FTT would feature a narrow base and would yield relatively less revenue.

Clinton said it is targeted at a growth in HFT that has "unnecessarily burdened our markets and enabled unfair and abusive trading strategies. … In particular, the tax would hit HFT strategies involving excessive levels of order cancellations, which make our markets less stable and less fair."

On the other hand, Sanders's FTT would have a wide tax base, imposing a 0.5 percent tax on the value of trading in company shares, or partnership and trust ownership interests; a 0.1 percent tax on trades involving any note, bond, or debentures; and a 0.005 percent levy on derivatives trading. It is intended that the tax's substantial revenues would be used to fund higher education, healthcare, and environmental programs.

The Tax Policy Center (TPC) has said a full FTT would be "inefficient and poorly targeted. While it would boost revenue, it would also spur tax avoidance, … [and would be] unlikely to prevent the kind of financial market failure that precipitated the Great Recession."

"Bernie's FTT could raise a lot of much needed revenue – and there are few revenue options out there," Steven Rosenthal wrote in TPC's blog on October 8. "Hillary's small HFT tax wouldn't raise [a lot of revenue], but could limit the worst of market abuses, without disrupting the market place much. So, the next presidential election may determine whether we go big, or go small, on Wall Street taxes."

TAGS: compliance | tax | investment | business | tax compliance | law | capital markets | equity investment | tax rates | United States | regulation | alternative investment | Tax | Financial Transactions Tax (FTT)

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