Sauter and Malkiel on a Transaction Tax

We've been writing quite a bit over the past weeks about the idea of a tax on certain stock and options transactions (see, for example, here, here, and here), so it's nice to see the Wall Street Journal get a piece of the story this morning with an op-ed by Princeton professor Burton Malkiel and the chief investment officer of the Vanguard mutual fund group, George Sauter, giving some reasons that such a tax is a bad idea. They didn't mention my favorite, which is that by taxing stocks and options but not government bonds, the politicians are just making it even easier for themselves to borrow and spend. The final two sentences of the Journal article struck me: "The transactions tax would gravely wound financial markets. It is hard to imagine a piece of legislation that would have more damaging unintended consequences." It's always dangerous to speculate about motivations, but it may be that Mr. Malkiel and Mr. Sauter are being too generous when they describe the consequences of the legislation as "unintended." It seems perfectly possible that the sponsors of the legislation actually don't like financial markets, and intend to wound them.