How about a Market Capitalization Tax?

I've been thinking about ways and means of raising the revenue to pay for The Big BailoutTM. I came up with this idea today but, as usual, someone else has beaten me to the theoretical punch some time ago. (see here, pdf, 455kb)

Basically the idea would be to tax every and any company listed on US sharemarkets. A tax is paid to the Federal government on a percentage of the listed company's market capitalization. This tax revenue is then used solely to pay back The Big BailoutTM and remains in place until the money has been paid back, with interest.

What tax rate should apply? One solution is a quarterly tax of 0.2% of a company's market capitalization (see here). In any case, whenever a listed company's market capitalization goes up, they are required to pay more tax - and pay less tax when it goes down. A quarterly tax could be based upon the average market capitalization of the previous three months.

Given the nature of the financial crisis and the fairness of punishing those responsible rather than burdening everyone with the debt, a "Cap Tax" is probably the best solution.

Unless someone takes my Zero Tax Proposal seriously that is.

1 comment:

BLBeamer said...

This is the best idea I've heard yet, from Arnold Kling:

But I have the most indirect route of all. Instead of having households give the money to government, and the government gives the money back to households, why doesn't every household write a check to itself for $5000? That would inject about $700 billion into the economy. Am I brilliant or what?

Link here.