The financial transaction tax is not a new concept. In 1694, King William III levied a stamp duty on all paper transactions, and a version of that levy still exists today, taxing many stock trades at 0.5 percent. Many other countries have imposed FTTs , some successfully and some not.
Drawing on data from the Bank for International Settlements and the Federal Reserve, Scott Smith (Tale of Two Economies: A New Financial Operating System for the American Economy, 2023) shows that the US monetary economy is hundreds of times larger than the physical economy. The budget gap could be closed by imposing a tax of a mere 0.1% on financial transactions, while eliminating not just income taxes but every other tax we pay today. For a financial transactions tax (FTT) of 0.25%, we could fund benefits we cannot afford today that would stimulate growth in the real economy, including not just infrastructure and development but free college, a universal basic income and free healthcare for all. Smith contends we could even pay off the national debt in ten years or less with a 0.25% FTT.
The trading of financial assets in the monetary economy represents the majority of the payments in the economy, eclipsing payments related to wages or the purchase of goods or services. Thus, it would be wealthy individuals and institutions, such as hedge funds, that would shoulder most of the burden of a payment tax.