Estimating the revenues that a MAC charge could generate is exceptionally difficult because this policy tool has never been used in a large, wealthy, reserve-currency country. Policies involving charges of various kinds on some types of capital have been tried in smaller economies such as Chile, Brazil and Malaysia. But nothing like the MAC has ever been tried in the
United States. We therefore have little basis for estimating the response of foreign speculators and investors to the MAC and thus potential MAC revenues.
Nevertheless, it is useful to know the range within which
the revenues might fall – if for no other reason than to satisfy curiosity. To help meet this need, two models are presented here based on cases designed to bracket the range of revenue that the MAC might generate.
Summary
In brief, the MAC is likely to generate at least $1.0 billion per year in the short term and could possibly generate up to $1.0 trillion per year if high-speed, in-and-out trading is not moderated by the MAC.
In the longer term, as the MAC moderated excessive foreign capital inflows, MAC revenues would decline. However, this reduction would be offset partially or fully by taxes on the additional economic growth stimulated by a MAC-based competitive exchange rate -- even if tax rates were reduced as part of a much-needed reform of the US tax code.
Summary
In brief, the MAC is likely to generate at least $1.0 billion per year in the short term and could possibly generate up to $1.0 trillion per year if high-speed, in-and-out trading is not moderated by the MAC.
In the longer term, as the MAC moderated excessive foreign capital inflows, MAC revenues would decline. However, this reduction would be offset partially or fully by taxes on the additional economic growth stimulated by a MAC-based competitive exchange rate -- even if tax rates were reduced as part of a much-needed reform of the US tax code.
