Editing Tobin tax (section)

== Original proposal ==

Tobin suggested his [[currency transaction tax]] in 1972 in his Janeway Lectures at [[Princeton University|Princeton]], shortly after the [[Bretton Woods system]] of [[money|monetary]] management ended in 1971.<ref name="Tobin">{{cite journal |url=https://ideas.repec.org/a/eej/eeconj/v4y1978i3-4p153-159.html |title=A Proposal for International Monetary Reform |author=James Tobin |date=July–October 1978 |journal=Eastern Economic Journal |volume=4 |issue=3–4 |pages=153–159 |access-date=2010-01-31 |archive-url=https://web.archive.org/web/20091017141902/http://ideas.repec.org/a/eej/eeconj/v4y1978i3-4p153-159.html |archive-date=2009-10-17 |url-status=live }}</ref> Prior to 1971, one of the chief features of the Bretton Woods system was an obligation for each country to adopt a [[monetary policy]] that maintained the [[exchange rate]] of its currency within a fixed value—plus or minus one percent—in terms of [[gold]]. Then, on August 15, 1971, United States President [[Richard Nixon]] announced that the [[United States dollar]] would no longer be [[convertibility|convertible to gold]], effectively ending the system. This action created the situation whereby the U.S. dollar became the sole backing of currencies and a [[reserve currency]] for the member states of the Bretton Woods system, leading the system to collapse in the face of increasing financial strain in that same year. In that context, Tobin suggested a new system for international currency stability, and proposed that such a system include an international charge on [[Foreign exchange market|foreign-exchange]] transactions.

In 2001, in another context, just after "the 90s' [[liquidity crisis|crises]] in Mexico, Southeast Asia and Russia,"<ref name="ex">Excerpt from original German article: "wie die Krisen in Mexiko, Südostasien und Russland während der neunziger Jahre gezeigt haben. Meine Steuer würde Notenbanken kleiner Länder Handlungsspielraum zurückgeben und dem Diktat der Finanzmärkte etwas entgegensetzen." - {{cite journal |url=http://www.spiegel.de/spiegel/print/d-20017795.html |title=Die missbrauchen meinen Namen (translated as "They Are Misusing My Name") (Interview with James Tobin) |journal=Der Spiegel |issue=36 |author1=Christian Von Reiermann |author2=Michaela Schießl |name-list-style=amp |date=3 September 2001 |access-date=2010-01-01 |archive-url=https://web.archive.org/web/20100606234912/http://www.spiegel.de/spiegel/print/d-20017795.html |archive-date=6 June 2010 |url-status=live }}</ref> which included the [[1994 economic crisis in Mexico]], the [[1997 Asian Financial Crisis]], and the [[1998 Russian financial crisis]], Tobin summarized his idea:

<blockquote> The tax on [[Foreign exchange market|foreign exchange transactions]] was devised to cushion [[Exchange rate#Fluctuations in exchange rates|exchange rate fluctuations]]. The idea is very simple: at each exchange of a currency into another a small tax would be levied - let's say, 0.5% of the volume of the transaction. This dissuades [[speculator]]s as many investors invest their money in foreign exchange on a very short-term basis. If this money is suddenly withdrawn, countries have to drastically increase [[interest rate]]s for their currency to still be attractive. But high interest is often disastrous for a national economy, as the nineties' [[liquidity crisis|crises]] in Mexico, Southeast Asia and Russia have proven. My tax would return some margin of manoeuvre to [[Central bank#Currency issuance|issuing banks]] in small countries and would be a measure of opposition to the dictate of the [[financial market]]s.<ref name="Jubilee-trans">{{cite web |url=http://www.jubilee2000uk.org/worldnews/lamerica/james_tobin_030901_english.htm  |title= James Tobin: "The antiglobalisation movement has highjacked my name" |date=3 September 2001|publisher= Jubilee Research, a successor to [[Jubilee 2000]] UK|access-date=11 February 2010 |archive-url = https://web.archive.org/web/20050306201839/http://www.jubilee2000uk.org/worldnews/lamerica/james_tobin_030901_english.htm |archive-date = 6 March 2005}}</ref><ref name="Reiermann">{{cite journal |url=http://www.spiegel.de/spiegel/print/d-20017795.html |title=Die missbrauchen meinen Namen (translated as "They Are Misusing My Name") (Interview with James Tobin) |journal=Der Spiegel |issue=36 |author1=Christian Von Reiermann |author2=Michaela Schießl |name-list-style=amp |date=9 March 2001 |access-date=1 January 2010 |archive-url=https://web.archive.org/web/20100606234912/http://www.spiegel.de/spiegel/print/d-20017795.html |archive-date=6 June 2010 |url-status=live }}</ref><ref name="excerpt">Excerpt from original German article:"SPIEGEL: Diese Bewegung will die Einführung einer Steuer auf Devisengeschäfte. Damit sollen die Kapitalmärkte gebändigt und mit den zusätzlichen Einnahmen die Entwicklungshilfe verstärkt werden. Klingt das nicht wie Ihr Vorschlag?

Tobin: Ich hatte vorgeschlagen, die Einnahmen der Weltbank zur Verfügung zu stellen. Aber darum ging es mir gar nicht. Die Devisenumsatzsteuer war dafür gedacht, Wechselkursschwankungen einzudämmen. Die Idee ist ganz simpel: Bei jedem Umtausch von einer Währung in die andere würde eine kleine Steuer fällig, sagen wir von einem halben Prozent des Umsatzes. So schreckt man Spekulanten ab. Denn viele Investoren legen ihr Geld sehr kurzfristig in Währungen an. Wird dieses Geld plötzlich zurückgezogen, müssen die Länder die Zinsen drastisch anheben, damit die Währung attraktiv bleibt. Hohe Zinsen aber sind oft desaströs für die heimische Wirtschaft, wie die Krisen in Mexiko, Südostasien und Russland während der neunziger Jahre gezeigt haben. Meine Steuer würde Notenbanken kleiner Länder Handlungsspielraum zurückgeben und dem Diktat der Finanzmärkte etwas entgegensetzen." - {{cite journal |url=http://www.spiegel.de/spiegel/print/d-20017795.html |title=Die missbrauchen meinen Namen (translated as "They Are Misusing My Name") (Interview with James Tobin) |journal=Der Spiegel |issue=36 |author1=Christian Von Reiermann |author2=Michaela Schießl |name-list-style=amp |date=3 September 2001 |access-date=2010-01-01 |archive-url=https://web.archive.org/web/20100606234912/http://www.spiegel.de/spiegel/print/d-20017795.html |archive-date=6 June 2010 |url-status=live }}</ref><ref name="Summaries">{{cite news |url=http://www.spiegel.de/international/spiegel/0,1518,154539,00.html |title=They are misusing my name |author=Spiegel Online International |date=3 September 2001 |work=English Summaries [of quotes in Spiegel Online] |publisher=Spiegel Online International |access-date=2010-01-01 |archive-url=https://web.archive.org/web/20101007025956/http://www.spiegel.de/international/spiegel/0,1518,154539,00.html |archive-date=7 October 2010 |url-status=live }}</ref><ref name="eumed1">{{cite web|url=http://www.eumed.net/cursecon/textos/tobin-antiglob.htm|title=James Tobin-El movimiento antiglobalización abusa de mi nombre|publisher=eumed.net|access-date=2007-10-23|archive-url=https://web.archive.org/web/20100612044229/http://eumed.net/cursecon/textos/tobin-antiglob.htm|archive-date=2010-06-12|url-status=live}}</ref></blockquote>

Though James Tobin suggested the rate as 0.5%, in that interview setting, [[#Optimum Tobin tax rate|others have tried to be more precise in their search for the optimum rate.]]

Economic literature of the period 1990s-2000s emphasized that variations in the terms of payment in trade-related transactions (so-called "swaps" for instance) provided a ready means of evading a tax levied on currency only.  Accordingly, most debate on the issue has shifted towards a general [[financial transaction tax]] which would capture such proxies.  Other measures to avoid punishing hedging (a form of insurance for cashflows) were also proposed.  By the 2010s the [[Basel II]] and [[Basel III]] frameworks required reporting that would help to differentiate them and economic thought was tending to reject the belief that they could not be differentiated, or (as the "Chicago School" had held) should not be.