Re: investors would simply stop
Why?
Because the tax costs increase exponentially with the amount of trading. It operates like compound interest. Think, 1% compounded hundereds of times a day in trading of the the same shares of stock for example, that goes on in creating the liquidity our equity and commodity markets require to be efficient and liquid.
What happens to a stock price when you try to buy it and there is on volume trading to absorb your transaction. Instead of buying on an uptick of 1/8th or 1/4, look for dollars .... and all taxed at some % of total price of the transaction to boot.
That floor trader than now assures your efficient trade at minimal tick to you, ain't gonna be their for you with every trade he handles being taxed to death, with each trade they undertake in a day.
Financial markets, equities, commondities all have the same problem, they rely of volume trading for smooth functioning and someone willing to take the risk of buying from you, or selling to another and absorbing the trade risks.
Tax in the APT manner, and that trading comes to a very quick end. Tax a thing, you get less of it.
Tax trading, and market transactions, ....... think about it.
There would have to be some tweaks to the system, and 1% is way too high number. I was just using it as any example.
John