Yes, it would be nice for the exchanges (and, yes, I do realize that Merrill and Goldman pretty much own the NYSE because they can threaten to cross trades in house and SIG owns the PHILEX, etc.) to get the spreads and commissions back the way they were before ECNs and commission deregulation drove down cushy, easy profits for them. The thing is, 30 years ago, foreign exchanges weren't providing significant competition to them. Today they are. The price elasticity of demand has increased. So, for every unit increase in transactions costs, there's a decrease in volume as traders simply find something else to trade abroad. Certainly, going to Singapore will be no problem for a pro trader. Retail guys are always screwed no matter what.
Because of this international competition, I don't think the big guys are going to be getting that edge (economic rent) back because if they do it by raising prices, they will lose volume to the competition. The only way they can win is by increasing volume by decreasing price. Already the big guys have cottoned on to this and they're providing locked markets on large trades for a commission instead of the bid/ask spread. No small market making firm can safely make that kind of market. If they add a tax to that, more of those huge trades cross on foreign exchanges and the big guys will lose commission.
If the only guys who are exempt are the big guy and that drives the small guys out of business, then no tax revenue (or virtually no tax revenue) will be collected. The only transactions will be infrequent ones by long term investors and volatility as well as the cost of raising capital for firms will go up as a result - which is how I define "killing the capital markets". Collecting a couple of dollars in tax revenue doesn't seem worth killing the capital markets for. But then....we're talking about government and government is fully capable of so much bullshit that nothing it does amazes me anymore.