NEW REPORT: Understanding and Evaluating a Financial Transaction Tax

Recently, a group of Reddit users generated national financial controversy. The users, members of the popular “r/wallstreetbets” Reddit community, squeezed out short-selling hedge funds by driving shares of GameStop up 1,500% in two weeks. The movement was driven primarily by retail investors – non-professional, individual investors empowered by trading platforms like Robinhood. The new phenomenon, brought about by the ability of retail investors to act in concert with one another, caused concern among those within the financial community. They fear that massive losses by hedge funds could affect other market sectors. Others viewed the controversy as an underdog story of small-scale investors taking on elite financial managers.

The GameStop issue renewed proposals for a financial transaction tax (FTT) to curb speculative trading. Such a tax would, in proponents’ view, restrict “excessive trading that is designed to manipulate the markets instead of benefiting the overall economy.” However, in seeking to disempower one class of Americans, an FTT would likely divert funding from other, worthwhile sources while only negligibly (if at all) fulfilling its stated objectives.

Learn more about financial transaction taxes and their potential impact on Kentuckians in our latest police primer here