I waffle on this one too. Institutions that do HFT have a huge capital cost and pay large fees before they even make their first trade. They also employ programmers, traders, etc. Basically, these taxes are going to need to sum to something really big to dissuade them. Too small, they ignore it. Medium, the market will just consolidate. Large, you'll stop HFT, but at what consequence? The probability of unintended consequences is high.

This is when I decide I don't really understand the market as well as I think, and I should stop solving the world's problems, and go back to designing circuits.

A tiny tax on each order (bid, ask) entry would cut the total volume of orders by a huge factor, cost them only a small fraction of their takings, and probably fund free college for everyone in the US.