Tobin Tax

AAA

DEFINITION of 'Tobin Tax '

A means of taxing spot currency conversions that was originally suggested by American economist James Tobin (1918-2002). The Tobin tax was developed with the intention of penalizing short-term currency speculation, and to place a tax on all spot conversions of currency. Rather than a consumption tax paid by consumers, the Tobin tax was meant to apply to financial sector participants as a means of controlling the stability of a given country's currency.

BREAKING DOWN 'Tobin Tax '

The Tobin tax has been controversial since it was originally introduced in 1972 by James Tobin, recipient of the Nobel Memorial Prize in Economics in 1981. Opponents of the tax indicate it would eliminate any profit potential for currency markets. Proponents state that the tax would help stabilize currency and interest rates because many countries' central banks do not have the cash in reserve that would be needed to balance a currency selloff.

RELATED TERMS
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects ...
  2. Alfred Nobel

    The man after whom the Nobel Prize is named. Nobel, born in 1833 ...
  3. Economist

    An expert who studies the relationship between a society's resources ...
  4. Speculator

    A person who trades derivatives, commodities, bonds, equities ...
  5. Economics

    A social science that studies how individuals, governments, firms ...
  6. Section 1231 Property

    A tax term relating to depreciable business property that has ...
Related Articles
  1. Options & Futures

    Are Derivatives Safe For Retail Investors?

    These vehicles have gotten a bad rap in the press. Find out whether they deserve it.
  2. Options & Futures

    Market Speculators: More Help Than Harm

    Speculators often get a bad rap, but it's important to remember that they only observe trends, not manipulate them.
  3. Options & Futures

    Trading Gold And Silver Futures Contracts

    If you are a hedger or a speculator, gold and silver futures contracts offer a world of profit-making opportunities.
  4. Economics

    Will North and South Korea Ever Reunite?

    North and South Korea have been divided for over six decades. Some analysts think the two countries could reunify within the next 10 years.
  5. Economics

    The Top 9 Things to Know About Hillary Clinton's Economic View

    Find out where former secretary of state and Democratic presidential candidate Hillary Clinton stands on the economy, jobs, trade and education.
  6. Economics

    Is Argentina a Socialist Country?

    Find out why it does not really make sense to call Argentina a socialist country, even though the South American nation has many socialistic tendencies.
  7. Retirement

    How do you calculate penalties on a 401(k) early withdrawal?

    Find out how to calculate the penalties on early withdrawals from your 401(k), including the impact of the additional 10% tax penalty, vesting and income tax.
  8. Term

    What is the Macro Environment?

    The macro environment is the conditions existing in an economy as a whole, rather than in a single sector or region.
  9. Savings

    A Look at the Cost and Tax Treatment of College

    Is there more we can do to improve the affordability of post-secondary education? We take a look at how students and colleges are taxed today.
  10. Taxes

    What's Wrong with the American Tax System

    American's are highly taxed and we still run a deficit. We explain why.
RELATED FAQS
  1. How do speculators profit from options?

    As a quick summary, options are financial derivatives that give their holders the right to buy or sell a specific asset by ... Read Full Answer >>
  2. Are spousal Social Security benefits taxable?

    Your spousal Social Security benefits may be taxable, depending on your total household income for the year. About one-third ... Read Full Answer >>
  3. Where are the Social Security administration headquarters?

    The U.S. Social Security Administration, or SSA, is headquartered in Woodlawn, Maryland, a suburb just outside of Baltimore. ... Read Full Answer >>
  4. What is the Social Security tax rate?

    The Social Security tax rate is 12.4% as of 2015. Of that amount, the employee is responsible for half, or 6.2%, and the ... Read Full Answer >>
  5. What is the Social Security administration responsible for?

    The main responsibility of the U.S. Social Security Administration, or SSA, is overseeing the country's Social Security program. ... Read Full Answer >>
  6. How is Social Security tax calculated?

    The Old-Age, Survivors and Disability Insurance program, or OASDI, tax is calculated by taking a set percentage of your income ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  2. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  3. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  4. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  5. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  6. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!