A tax of 0.25 percent on the sale or purchase of a share of stock will make little difference to a person who intends to hold the share for 5-10 years as a long-term investment. This tax would cost someone buying $10,000 of IBM stock $25 when they purchase their shares. If the price doubles in ten years, then they will have to pay $50 when they sell. These fees would be dwarfed by their capital gains taxes.

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A small increase in trading costs would be a very manageable burden for those who are using financial markets to support productive economic activity. However, it would impose serious costs on those who see the financial markets as a casino in which they place their bets by the day, hour, or minute. Speculators who hope to jump into the market at 2:00 and pocket their gains by 3:00 would be subject to much greater risk if they had to pay even a modest financial transaction tax.

Similarly, the financial engineers who specialize in constructing complex financial instruments may find an FTT to be a nuisance. An FTT could cause their derivative instruments to be taxed at several points. For example, the trade of an option on a stock would be taxed, as would the purchase of the stock itself if the option was exercised. More complex derivatives could be subject to the tax many times over, substantially reducing the potential profits from complexity.

The Wall Streeters and their flacks will insist that an FTT is unenforceable and will simply result in trading moving overseas. There is a small problem with this argument call the “United Kingdom.” The U.K. has had a tax on stock trades (trades of derivatives and other financial instruments are untaxed) for decades. The revenue raised each year would be equivalent to $30 billion in the U.S. economy. Obviously, the tax is enforceable.