The Currency Transactions Tax: Opportunities and Opposition in the Post-Crisis Environment

As speculation in foreign exchange (FOREX) markets has been linked to financial crises, a Currency Transactions Tax (CTT) has been proposed. But there is a gap in the literature: given its feasibility, why has one not been adopted? This paper analyzes why the United States, a country that could benefit and could bear a tax, has not adopted one. Though the 2007-08 Crisis was not caused by FOREX, it sparked interest in reforms including a CTT and the Financial Transactions Tax (FTT). This paper uses the garbage can model that assesses policy agenda-setting based on the convergence of problems that justify action, political agendas and turnover, and available policy solutions. Analyzing factors including the 2007-08 Crisis, commitments to other reforms, lobbying by the financial industry, and political turnover, this paper finds the failure of seven CTT/FTT bills mainly results from the lack of political receptivity.