Tobin Tax = a tax on financial transactions

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Sounds like Jason Ruspini shouldn&#8217-t lose sleep over it &#8212-it won&#8217-t happen:

Previously:

Paul Krugman Tries to Foist Specious Argument in Tobin Tax Debate.

Jason Ruspini is against the Tobin Tax.

BetFair co-founder Ed Wray laments the suppression of UKs tax incentive for startup entrepreneurs.

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BetFair chairman Ed Wray: &#8220-Too many hurdles in the way of enterprise&#8221-.

Wray refers to a tax incentive that he and Black used to launch Betfair after they were forced to go to friends and family for funds, having failed to raise capital from institutional investors.

&#8220-That was very useful in terms of getting the business off the ground. Everything I see now is about cutting back on those opportunities.&#8221-

Tax Futures, In Real Life

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I am very pleased to announce the world&#8217-s first tax futures on Intrade. I thank John Delaney and everyone there for their help and enthusiasm in getting these off the ground.

The contracts will forecast the highest marginal single-filer federal tax rates for 2009, 2010 &amp- 2011. I expect trade to be concentrated in the 2011 contracts, as Bush&#8217-s 2001 tax cuts are scheduled to expire that year, reverting the rate in question from 35% to 39.6%, while the lower bracket rates each increase by 3%. While it is less likely, Congress may also alter the Bush tax cuts for tax years before 2011, but such changes would probably impact 2011 as well.

If reasonable liquidity can be sustained in these markets, I hope that contracts will be added to predict corporate taxes, and other factors that contribute to individual effective tax rates, like the Alternative Minimum Tax and the social security cap. Given the tremendous hedging utility of such markets, maintaining a liquid two-way market might be tricky, although there are some obvious ways for any market-makers to hedge what might become a position more short of taxes than usual.

Please read the last post on &#8220-Policy Event Derivatives&#8221- for some background on the potential benefits of such markets. I should add that while I am confident in their long-term value of making better group decisions and sharing risk, I am sensitive to some foreseeable pathologies, and don&#8217-t want to give the impression of being too cavalier at this point. There are potential problems and side-effects stemming from the use of such markets that will be addressed later.

[Cross-posted from Risk Markets And Politics]

Previous blog posts by Jason Ruspini:

  • My response to the CFTC on event contracts
  • The CFTC safe-harbor option for event markets
  • CFTC regulation and election contracts
  • Asymmetry in Obama nomination market
  • Prediction Markets: Powerful enough to be dangerous?
  • 2009 tax futures yielding 1.5%
  • Intrade, with carry