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Well, the Forex argument has been thrown out there many times. There is no doubt that some or most trading would seek another venue BUT it does not represent that big a piece of the pie. For one thing it is the actual dollars changing hand NOT the full leveraged size of the contracts. ALL investment trading represents 25% of the tax base -- don't know exactly how much Forex represents but there are several other large players in that space. This is why the theoretical/calculated transaction tax base is chopped in half before the 0.25 to 0.3% rate is calculated.

I for one do not see why we should all continue to pay 70x the tax we need to pay just to keep Forex and day traders happy -- folks, there are bigger issues. When India added their Security transaction tax (1%) their financial markets were all pronounced DOA -- but, alas, that turned out to be a very self serving threat, and, in reality, their markets and their budget flourished. Other countries do assess a variety of taxes that approach the APT rates. As an aside I point out that the economic specialty of the author, Dr. Feige, is foreign exchange and "dollarization" of economies -- so I am thinking he has knowledge of any significant effect and has dismissed it.

Lastly, to Eagle, the above is exactly why we cut the tax base in half -- it is arbitrary and therefore, as you say, incorrect. The rate could be much lower. Well, I hope you are 100% right -- the cut, after all, is just theoretical, to counter the many arguments that are hard to disprove in reality or are true but simply not of a threatening magnitude. A new idea needs room for error. It is amazing to me we can claim what we do despite this drastic cut from which most ideas would perish. Indeed, I believe, institution of APT would be cause for many more transactions as foreign investors pour into the lowest taxed society in the world!