According to Saturday’s Wall Street Journal, the concept of taxing financial transactions is gathering support in high places in the United States.

For quite a few years this publication has been advocating the concept of a modest government levy on the transfer of funds to and from local financial institutions; however, in the past, this has either fallen on deaf ears or provoked opposition from Cayman’s financial services industry on the grounds that it would drive away business.

Now the Wall Street Journal reports that, with budget deficits soaring, US policy makers and other advocates are eyeing the huge sums that could be raised as a way to cover the costs of new initiatives.

Last week, the “Economic Policy Institute floated the idea of a national transaction tax that would raise $100 billion to $150 billion a year,” the newspaper reported.

The tax, at a rate of 0.1% to 0.25% of the value of the trade (10 cents to 25 cents per $100), would be levied on all financial transactions such as stock trades, but not on consumer transactions such as with credit cards.

The Cayman Islands government is clearly not unaware of the concept or its possibilities, as demonstrated by the new tax (described as a “fee in the Budget Address) of two percent to be charged on all remittances leaving the Cayman Islands through money transfer agencies.

The difficulty we have with this proposal, as we have pointed out in the recent past, is that it falls unfairly on the less well off and usually foreign workers when sending money home to their families.

The financial services industry – where the bulk of the money resides – remains conveniently untouched in this respect, as a result, no doubt, of resistance, actual or perceived, from the local financial sector.

The arguments doubtless deployed by the banks and professional firms are that the Cayman Islands will lose business if we introduce a tax or other levy on financial transactions across the board – not just on those conducted by the less well off, who have no equivalent lobbying power.

In such an event, anyone with financial accounts in the Cayman Islands will, it is said, move those accounts to our competitors in other jurisdictions.

Thus, hedge funds hitherto moving share subscription and redemption funds through a Cayman Islands account will simply move their bank accounts to other jurisdictions.

Of course, the obvious question in this regard is to what extent our economy benefits from the presence of such money in local accounts in the first place.

One difficulty that we, and the public at large, face in trying to assess the likely impact of a small financial transaction tax is that there are no published statistics from which to calculate the revenue raised thereby.

However, we do know that Cayman Islands financial institutions and professional firms are reported to have trillions of dollars under management or, at least, kept on the books of local entities or branches.

If, let’s say for the sake of argument, that $2.5 trillion is booked in or through Cayman Islands financial institutions and firms at any given time, it would not be unreasonable to assume that 10 percent ($250 billion) of such money moves to or from Cayman, or some other transaction occurs locally in relation thereto in any given year.

On that amount, the lower rate of tax currently under discussion in the US (one tenth of one percent – or 10 cents per $100) would produce $250 million worth of revenue for the Cayman Islands government annually.

This would certainly be enough to turn around our faltering economy and provide a financial cushion – without having the need to borrow in the years ahead.

Of course, the financial services firms will say that they or the funds under their management should not be taxed, so tax real estate instead – which is immovable and isn’t going anywhere, unlike people and money, which can move quickly and easily.

However, the realtors strenuously resist the concept of a property tax, whether dressed up as an annual community service charge or not.

The problem is that no one wants their lucrative business sector taxed and so those that do get hit the hardest are those without any real voice in the community – the lower-paid foreign workers – and the small businesses that have no effective lobby.