Germany and France are already on board in support of a financial transactions tax, and one outcome of the meeting of Italy's new leadership with Chancelor Merkel is that Italy is on board. See AP, Italy Backs Financial Transactions Tax, New York Times, Jan 11, 2012.
A financial transaction tax has several advantages especially relevant in this post-financial crisis period. It raises additional revenues in very small increments on financial trades. That is not likely to have a negative impact on trades, but is likely to raise much needed revenues for starving educational systems, transportation systems and other important government programs.
Further, to the extent it does act as a disincentive to financial transactions, that, too, accomplishes a public good. The financial transaction tax is really a variety of the so-called 'sin taxes' that provide revenue when the purchase behavior continues and a social benefit when it ceases. Finance has become too large a part of the economy, and much of what passes as financial activity, as we saw in the 2007-08 financial crisis, was really 'phantom' activity--trading at several times removed from the productive economy that gives people (other than bankers).
It remains to be seen whether the US can pull its dysfunctional government together enough to make reasonable decisions about such options as a financial transactions tax. First, we have far too many far too well paid and far too well connected lobbyists roaming the halls of Congress and influencing votes in favor of the big financial institutions' perspectives. Second, the far right's emphasis on a version of "free markets" that fails to understand nuances of externalities, biases and framing issues leaves no room for recognition of the many negative aspects of unregulated marketplaces. Third, the Republican party members in Congress have been engaged in obstructionist behavior that leaves little room for any reasonable compromises or even consideration of the justness of a position--they are engaged in election gamesmanship with Supreme Court and other federal court judge nominations at stake, along with an objective of taking broad-stroked deregulatory action across federal agencies, from the EPA to Energy to Education to the IRS. All of these trends bode ill for the US to get its act together and set in place provisions that will further rein in the finance excesses.
But if Italy can make progress in this regard, surely we can.....
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