How would taxing HNWI (High Net-Worth Individuals) 10% to raise 1.28 trillion dollars impact stocks and bonds, and what would the tax mean for future methods of handling crises?
First, it is highly unlikely that "high net worth individuals" (HNWI's) would sell 10% of their portfolio to meet such a tax demand. It is much more likely, since these are people who mostly earn the very highest incomes, that they would use a portion of those incomes to pay a good share of such a 10% tax on their portfolios. Second, a 10% tax on HNWI portfolios could - and I think should - be structured progressively. In other words, those with only $ 1 million in their portfolios might pay 1-2% whereas those with over $30 million (called "Ultra-HNWI's" by the way) might have to pay 12-13 %. Third, it would be easy to assess such a portfolio tax across the year, say every three months, precisely to reduce the impact of whatever stock and bond sales might occur. Fourth, portfolio managers, knowing that such a tax was in place, would accordingly adjust their management strategies. This is what happened in the many years since the IRS began requiring payment of quarterly estimated income taxes during the year. Fifth, the richest US citizens, knowing that they would be taxed according to the size of government deficits in times of national economic crises, would be (a) far more careful and skeptical about financial speculation and financial bubbles and (b) far more likely to demand and support government regulation and monitoring of financial markets than they have been. And that would do much to calm markets and to prevent wild oscillations of markets (as in 2008-2009), thereby offsetting whatever a 10% tax on portfolios might do to markets.
Remember, also, that US stock markets are not just markets for the US citizens who would be subject to the portfolio tax; they are markets for the wealthy of the entire world who would likely adjust their stock market sales and purchases to take account of - and thereby offset - a portfolio tax just like they adjust for the many other events (e.g. US citizens' tax-focused selling near the end of the calendar year) that influence stock market movements.
Perhaps most generally, the key point is that any way of responding to the current economic crisis carries its own particular set of costs and benefits, disruptive and calming effects. My argument aims to show that the current discussion among US political leaders, media spokespersons, most academics, and even among too many social critics simply refuses to include any consideration of responses that find the requisite funds from those most able to pay. That is neither rational nor just; it panders to the richest at the expense of everyone else in finding solutions to a crisis that is more the responsibility of the richest than of the rest of us.