Another argument against a transaction tax is that, in order to not simply push trading elsewhere, it would have to be global. Even Speaker Pelosi understands this; by one account, she said, "It would have to be an international rule, not just a U.S. rule...We couldn't do it alone, we'd have to do it as an international initiative." By another account, she said, "what we are talking about is a global transaction [tax]...something that we would do in conjunction with other G nations, whether it is G8, G20, whatever the current G number is." When companies get together to fix prices, it's called an anti-competitive, anti-consumer anti-trust violation. But when countries get together to fix tax rates, it's called international cooperation. As we've pointed out before in other contexts, the G20 includes such undemocratic countries as Saudi Arabia and China (remember how China treats its human rights lawyers?), so allowing these countries to play a role in imposing American tax rates veers uncomfortably close to taxation without representation. This is an issue bigger than merely the transaction tax; the prime minister of Britain, Gordon Brown, and the president of France, Nicholas Sarkozy, have an op-ed in today's Wall Street Journal in which they agree that a "one-off tax in relation to bonuses should be considered a priority" and add that "the action that must be taken must be at a global level. No one territory can be expected to or be able to act on its own." One of the things the American Revolution was about was preventing British politicians from setting American tax policy. First it was tea, now it is banker bonuses. The Sarkozy-Brown article also mentions the need to "address climate change," and one of the less attractive aspects of the Copenhagen conference is seeing China, the world's largest polluter (did we mention how it treats its human rights lawyers?) lecture America on how the U.S. has a "legal and historical responsibility" to pay billions of dollars to poorer countries to fight global warming. All in all the picture is of the power to tax slipping away from America's elected representatives and into the hands of foreign politicians, which is cause for concern, even for someone like me who as a general matter is far more internationalist that isolationist in disposition and who supports the ability of sovereign states to negotiate tax treaties in their national interests.
A Global Transaction Tax