Skip to comments.The .03% Solution (new tax on transaction)
Posted on 02/07/2013 5:01:47 AM PST by Sir Napsalot
Last month, 11 European countries, including France and Germany, moved forward on introducing a minuscule tax on trades in stocks, bonds and derivatives. The tax goes by many names. It's often called a Tobin tax, after the economist James Tobin. In Europe it goes by the more pedestrian financial transaction tax. In Britain, it goes by the wonderful Robin Hood tax, and is supported in an often clever campaign.
On this side of the Atlantic, there is a ghostly silence on a transaction tax in respectable political quarters. But that might change. This month, Sen. Tom Harkin, Democrat of Iowa, and Rep. Peter DeFazio, Democrat of Oregon, plan to reintroduce their bill calling for just such a tax.
A transaction tax could raise a huge amount of money and cause less pain than many alternatives. It could offset the need for cuts to the social safety net or tax increases that damage consumer demand. How huge a sum? Harkin and DeFazio got an estimate from the bipartisan Joint Committee on Taxation, which scores tax plans. It's a hearty one: $352 billion over 10 years.
The money would come from a tiny levy. The bill calls for a three-basis-point charge on most trades. A basis point is one-hundredth of a percentage point. So it amounts to 3 cents on every $100 traded.
Critics of such a tax cavil that it will harm our capital markets and won't raise that much money. They argue that such a tax cannot be enforced; that it will depress trading, leading to lower asset prices; and that it will ultimately be passed on to retail investors.
These are anemic arguments, and are completely destroyed in an excellent piece of myth-busting by a group in Britain called Stamp Out Poverty.
(Excerpt) Read more at propublica.org ...
So let trading costs rise again, .... The average American, who has limited exposure to the stock market, has little to fear from the tax and much to gain. And if some of the high-frequency trading flees offshore? Good riddance.
And this - Alternatively, let's suppose that a transaction tax succeeds beyond expectations in bringing down excessive trading and doesn't raise as much as projected. Fine. The American capital markets will become less volatile and more connected to fundamentals. Pension fund and mutual fund managers will have an incentive to hold stocks longer and adjust their investing expectations.
Sounds too wonderful? What do the wise FReepers think?
Once the government initiates such a “minuscule tax”, it’s Katy bar the door! The income tax went from miniscule to a top marginal rate of 80 percent in just three years.
Propublica is just another Soros front group.
Much easier solution: Get gov’t out of the Free Market, welfare and back to its Constitutional role(s).
Again and again, the stories coming out these days show the ineffectiveness of gov’t ‘oversight’ and regulation; lack of or selective enforcement of current laws...But always some NEW law to ‘bridge the gap’ and extract just a BIT more from everyone’s wallet.
Institutionalized theft. There is nothing else you can call it.
Americans voted into office this crowd of irresponsible, greedy and unprincipled thieves. Was America ever prey to such unscrupulous bounders?
Voters have absolutely NO business to complain. It’s what they wanted.
These Liberal parasites will not stop until everyone in this country is reduced to pauperism. The stranglehold they have on us as individuals and on this country as a whole is so dangerous and destructive that it has produced wholesale paralysis.
I want to be around when O is no longer holding this mass of greedy and ill-informed idiots in his thrall. I want to see the looks on their faces when they GET IT... when the music stops, the spell is broken and the dream is over!
If 50% of American voters put O in office then 50% of America is complicit in this criminal assault on our system and this reckless disregard for our future.
Every government is a parliament of whores. The trouble is, in a democracy, the whores are us. P. J. O’Rourke
Shame on US!
OK, thanks, I didn’t know that.
A transaction tax here is almost inevitable IMO. Once the Dems start crowing about it and the MSM starts their nightly drumbeat the opinion polling of voters who think that the EEEEEEVIL BANKERS should “repay their bailouts” will be north of 75%, causing the Pubbies to roll over like a blue tick hound.
The next decade is going to be all about fighting this impression that “the evil rich should pay for it” IMO.
I think there is NO REPUBLICAN who COULD win any public debate against this tax... probably not many that would even try.
If any Democrat proposes it, it will pass...
>>> A transaction tax here is almost inevitable IMO.
I think you are right.
Nowadays, lawmakers and “thinkers” all look at Europe and elsewhere to see ‘their success model’, our own past success model (small-er government, low-er taxes) completely ignored.
Initially it would be a fraction of 1% and have a negligible impact. But inevitably they’d start cranking it higher to fund the ever-growing government. Just like a VAT it would be one of these “out of sight, out of mind” taxes (which the Democrats LOVE btw)
When you argue about the details of the implementation, you send the message that the idea itself isn't the most objectionable part, thus emboldening the other side.
And it's a ridiculous argument anyway. It's beyond obvious that the tax would be mandated at the time of purchase, like the gas tax, sales tax, etc.
Indeed. Even a 1/100 cent charge on any order placed would be the end of that crap in a heartbeat. One of many proofs that the SEC and CFTC have no interest in honest markets is that this isn’t in place. The implementation costs would be absolutely negligible.
Trading costs didn’t cause the stock market bubble; it was nonstop easy money from the Fed absolutely distorting the laws of economics.
YEARS ago I worked in Suffern, NY as a typesetter. One story I set type on was a heated battle between some guy who owned a quarry and the City Council. It seemed that they wanted to impose a miniscule tax on the sand he removed - probably something on the order of the above stock tax. He fought tooth and nail, and at the time, being politically naive, I wondered why he was making such a big fuss.
Then I had my epiphany when he said that the amount was indeed small, but it wouldn't stay that way for long. Right now they had to ask for permission to impose the tax, but once it was enacted, they could rubber-stamp the increases until they put him out of business.
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