Saturday, November 28, 2009

A Transaction Tax -- Another Bad Idea

The transaction tax idea that is now floating through Congress is another absurdly bad idea. This one originated in the minds of Congressional Democrats, ever on the hunt for more tax dollars. Imagine that such a tax is enacted. China will be all for it. Taxing transactions in the US makes them more expensive if done in the US. Why not do the same transactions in China and avoid the tax?

If you want a good laugh, read Paul Krugman's defense of the transaction tax. Krugman seems to see this as a way of punishing bad guys and rewarding good guys. When the transactions move to China, how does that punish bad guys and reward good guys?

By making the US less competitive by imposing transaction taxes on security transactions, these transactions will simply take place somewhere else.

China must love American Democratic politicians. China could not write a better script.