Securities Transaction Taxes

An Overview of Costs, Benefits and Unresolved Questions

G. William Schwert

University of Rochester, Rochester, NY 14627
and National Bureau of Economic Research

Paul J. Seguin

Analytic Focus LLC

Financial Analysts Journal, 49 (September/October 1993) 27-35
Reprinted in Securities Transaction Taxes: False Hopes and Unintended Consequences,
Suzanne Hammond, ed., (Chicago: Catalyst Institute, 1995), 1-26
This paper provides an overview of the arguments for and against a Securities Transaction Tax (STT). Most agree that such a tax will have adverse effects on the liquidity of the affected markets, and probably on asset values. There is debate about whether this type of tax on capital is an effective or desirable method of collecting revenue and controlling price volatility. It would be difficult to design a tax that did not provide strong incentives to seek alternative trading methods or markets for tax avoidance. The distortions created by taxation and avoidance are likely to be large.

Key words: Liquidity, Market Efficiency, Tax Incidence, Distortions, Volatility

JEL Classifications: G28

Cited 53 times in the SSCI and SCOPUS through 2020
© Copyright 1993, AIMR
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