Posted on 12/05/2004 9:03:22 PM PST by APT Project Director
"Take the energy and resources and intellect you are expending and get behind the FairTax."
AMEN!
While such a tax -- 0.6% of the gross value of the transaction is usually the figure mentioned -- will not cause a halt in investment, it will reduce trading liquidity in its tracks, in every market affected (here, meaning anything trading in NYC, Chicago, Philly, Boston, or on any domestically-run electronic exchange. Why? That's such a cinch to answer that even today I find it hilarious that any marginally informed or sane person doesn't see the answer as pellucidly as looking out the window at the sunrise.
The person purchasing shares for the long term won't much care about a 0.6% inside tax...but that person is NOT the bulk of the marketplace, merely a small fraction of it, and in any case there are many other things trading than shares of common stock, whether on or off exchange floors.
See if you can follow the addition, boyo -- then, tell me in all your expert (cough) wisdom why you won't kill off, literally kill right off, an enormous number of markets. Ready? Here we go with a nice, everyday, real-world (I know that's not your favourite world, but one has to start someplace) example.
Light Sweet Crude Oil for January 2005 is trading on NYMEX at $42.70/bbl as I write this. The gross transactional value of 1 contract -- 1000 bbls per contract -- is of course therefore $42,700. 0.6% of that is exactly $256.20. A typical commission on one side of a crude trade is $15-18, including floor fees and whatnot, and, of course, the trader will have to dispose of the contract at some point in future, costing another commission. Let's say, for convenience, that total commission and price slippage cost the trader $50.00 round-turn, thus something on the order of $310 in transaction costs for each contract traded.
Boy, what slick geniuses you people are. That's 31 points per contract, and I'm here to tell you right now that NO -- absolutely NO -- retail trader is going to deal in that kind of market, with such excessive costs. Kiss 'em goodbye from day 1 of the implementation of your asinine tax. But wait (as good ol' Ron Popeil always says), there's more.
Guess who else won't play, at that level of cost? The floor traders, the chaps who make the market. Ordinarily their costs are a couple of dollars -- that's right, putznagel, $2.00, $3.00, $4.00 or less -- per contract. You're going to hit them with a 12,250% increase in their daily business costs? The hell you will, pal -- the price of every exchange seat in the country will be down 80% or more before you can turn around. And, I wouldn't give real short odds on your continued existence should you happen to bump into one of them after implementing your little fantasy world, either.
Stick around, dimwit -- I'm just warming up on this topic, and, unlike you and your fantasy world, I deal in the real world. Typically, you clowns will attempt to brush off the argument so-far-made with something like, ''Well, that's just the commodity futures markets. That's just a gambling game, and we'd probably be better off if those markets were sharply curtailed in the public interest.'' Or some set of words to that effect, right?
Now, if it happens that you're somehow bright enough to NOT make that economically illiterate argument, please skip down to the next graf. How valuable are futures markets to the US? Oh, I'd say fairly valuable. Generals Grant and Sherman, and President Johnson, after the Civil War, made a special trip to the Chicago Board of Trade to thank the members, and the exchange, for their assistance in seeing that the Union armies had timely deliveries of oats (and other feed) for their horses, and also for preventing a food panic in the Eastern cities. That's just one of several dozen major examples, btw -- many more on request.
However, the futures markets aren't even the principal instance of the havoc your and your fellows' lunatic scheme will create. Let's just talk about debt for a moment.
The US gov't, and many of the states, and too many of the counties and cities, RUN on debt -- they quite literally can't exist without the issuance of debt. 0.6% is 60 basis points, chief; do you really believe that those who finance this government, especially increasingly the Japs and the ChiComs, are going to EAT 60 bp just because they're such nice chaps and admire your brain-damaged idea so much? Yah, right. Got some oceanfront property in the Sahara for ya, too. They're going to DEMAND that 60 bp back -- and even a bit more -- before the buy the bloody bonds in the first place. Sheesh. So, cleverly, your dingbat scheme immediately forces interest rates higher all along the yield curve, on a cost-plus basis. Why cost-plus? Because guess what, junior, Goldman and Solly and Paribas and Barclay's and every other investment bank in the world aren't going to accept your little haircut either. Their spreads will ALSO change immediately, to cover YOUR imposed cost. So, the gov't will pay more for money, not once but twice, and guess who foots the bill? Right you are, every taxpayer in the land will get, directly or indirectly, a tax increase. Ah, the marvels of static economic analysis, as practiced by incompetents!
Now, markets aren't going to shut down because of you and your dipstick notions (well, a few will -- but what the hell, you don't care), but what WILL happen, absolutely as quickly as can be arranged, is that every, and I mean EVERY, trading company will shift their emphasis elsewhere, meaning out of NY, out of Chicago, out of the US. They'll trade crude on IPE and SIMEX, Eurodollars on EUREX and SIMEX, corn and beans in Tokyo f'Heaven's sake, coffee and cocoa on LIFFE, US bonds in half a dozen places...and every damned bit of that volume will come right straight out of the US. That'll be just fine for the economy, won't it?
But you dorks will love it, because the revenues you anticipate from your little Frankensteinian adventure WILL NOT MATERIALISE, and you'll get another chance to tax the kwap out of everyone with another idea from Dildoes 'R Us.
The good news here is only that the markets have SO much more clout than paretic academics like you and Tobin that your crackhead plan hasn't the slightest chance of making it into law, even incrementally.
And, by the way, I haven't yet even gotten to what your faex-like idea will do to the dollar middle-term AND to retirement accounts immediately, whether SS or otherwise, throughout the nation. Nor will I withdraw one single ad hominem remark in this message; intellectually, you deserve every one of them.
And, of course, a Merry Christmas to all of you!
Thanks for taking the time to go through the real situation in detail, and for pinging me to your post.
You are 100% correct.
I would nominate your post #62 to the FR Hall of Fame, if one existed.
Dang, I think we should start one, with your post as the first entry!
Can't say I've ever seen a more effective deconstruction/destruction of anyone or anything here.
And I can't think of a single more deserving target of such a lovely hydrogen bomb. ;-)
And incidently, I feel truly honored to have you agree with any post of mine. I mean it.
Thank you for the clear explanation of the effects on the markets. Even I could understand it!
A very Merry Christmas to you, too. :)
And a blessed Christmas to you and yours as well!
May the value of your portfolio double! ;-)
Works for me...great idea (g!)
Your statement of 33% being revenue neutral BASED ON FAMILY INCOME may be right BUT Family and corporate adjusted gross income is less than 2% of the APT tax base
I see, you are telling us the APT base is 40 Times Gross Domestic Product?
Assuming this is true, upon whom is the tax economically incident?
Apparently you believe it is not the American citizen.
that's how the very low rates are possible.
The APT base is the cash dollar flow of the economy, (i.e. the same dollar taxed multiple times, exponentially increasing the tax amount take by government in the same manner as compount interest) as it is applied in the production and delivery of all the components throughout the chain of production that go into the delivery of product to the consumer.
What Real Rate of tax, as in Truth In Lending does the consumer ultimately pay???
The answer 33%+ as measured against the citizen's gross income, not counting the overhead costs on business attendant with the imposition of that tax that impacts GDP as well.
For all taxes must of necessity be incident on the American people.
Please look at the numbers and read the website carefully, there are alot of details there (www.apttax.com).
I have,
Then ask yourself should we just pass on a serious opportunity to pay 70 TIMES less Federal Tax than we have to?
I also recognise a snow job when I see one.
Because the tax is relatively so small much of it will be taken up by the market forces and bidding process.
And ultimately passed on to the American people in higher interest rates, financial fees, brokerage fees, passed to buisiness as it of necessity conducts it commerce to deliver goods an services to the American people at a markup of course for the costs incurred and the taxes paid.
That percentage markup on goods and services will be 70 times the the advertised rate of the tax, multiplied by the percentage cost factors imposed on business and finance for each dollar exctracted in the process as revenue to the government.
In the end the full burden upon the American citizen will be as great or greater than the income/payroll tax system we have now, and certainly much greater than the single time, single rate National Retail Sales Tax.
All with total loss of financial/banking privacy of both citizen and business that comes with a universal transaction tax.
This is the burden on the American citizen today:
We must . . . End Tax Slavery Now; Nov '97
by Jarret B. Wollstein
HOW MUCH DO YOU REALLY PAY?
According to the Tax Foundation, in 1994 the average American paid 22.4% of his or her income in federal taxes, plus 11.8% in state and local taxes - 34.2% total.
But that's just the beginning! Dr. James Payne of the University of California found that in addition to direct taxes we also pay huge, hidden taxes including:
- Compliance costs - record keeping, monies spent on tax planning, computers and software purchased to fulfill IRS requirements, etc.
- Enforcement costs - IRS audits, field investigations, service center corrections, criminal investigations, litigation, and forced collections.
- Emotional, moral and cultural costs - families forced onto welfare, time and creative energy lost figuring out how to avoid taxes, etc.
For every $1 we pay in direct taxes, we spend an additional $0.65 in compliance costs. And even that figure doesn't include the cost of import duties, license fees and other government regulations. For a typical U.S. family, the real cost of taxes and regulations is at least:
Federal taxes 22.4% of income
State & local taxes 11.8%
Compliance costs 22.2%
Regulatory costs 12.7%70.1% of your income is now consumed by government
How much more, as well as total loss of financial privacy will a Universal Transaction Tax with 40 times the GDP number of transactions to tax be?
The answer is definitely more. In liberty, In privacy, and in Dollars.
No thank you.
Your reply is a definite keeper as future hyperlink reference for any mention of the AFT on the web.
Outstandingly put!!!
That's how the federal income tax started - a tiny, flat tax.
It was only to start at a person's income of something like $10,000, which, at the time, was enormous! And then the tax was only something like 1%.
It proves that it's better to not trust the government in such things. They love to get a foot in the door and then blow it up into a really obnoxious program.
This one's blown up & obnoxious before even getting out the shute.
Bump
It seems that you are supporting a system that makes the effect to all American's seem negligible while still raising the funds to continue to expand the government. How is this good? Why not support a system that causes enough pain to all Americans that they begin to scream at the voting booths for government reduction?
In addition, doesn't this require government tracking of all transactions? Why do I want the government's camel nose under my tent of transactions?
"What it all boils down to is -- since no freedom is being sacrificed -- is any argument reason for everyone to continue to pay 70 TIMES more tax than they have to."
Therein lies the fault of your logic. Everyone does not pay 70 times more than they have to. Only half, and soon less than half, pay any taxes at all. What we want is a system that forces everyone to carry the burden of the teat suckers and then for everyone to become aware of the cost of the largesse. A big number (NRST) is not evil, the fact that it is the true cost is what is evil.
Your proposal only replaces the current system, it does nothing to motivate the citizens to hold modern day tea parties! In addition, you even discuss rolling in state taxes....What ever happened to seperate levels of gov't.
"Think about it. The avcrage family would pay only a few hundred dollars in taxes, federal, state, local, Social Security, Medicare, and sales tax. That's it."
Where is the shortfall made up? If the average family is paying only a fraction of their current tax bill, where is the revenue made up to carry to current budget responsibilities?
So the tax burden placed on high BOM goods manufactured in the US would be exponentially higher than those manufactured in foriegn markets....Hmmm, how is this good for the american worker?
I agree but have a feeling that we could cut spending by 99% and taxes would not change....they will keep taking because they CAN not because they need too!
"But, instead of paying $8.25 sales tax for a $100 purchase, you would pay only 28 cents."
Except that the price of that $100 good will already be tagged at $110 then you'll pay your $0.30.
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