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Dems consider tax on big stock trades
Traders work on the floor of the New York Stock Exchange
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KAI RYSSDAL: Question: What do you do if you're a lawmaker and you need to raise money?
Answer: Bump up the taxes you've got or think up new ones.
Congressional Democrats have one in mind. A new tax on trades on Wall Street.
Marketplace's Nancy Marshall Genzer explains how it might work.
Nancy Marshall Genzer: The legislation would impose a quarter-percentage-point tax on large stock transactions. On a million-dollar trade, for example, your tax would be $2,500. There would be a slightly smaller tax on derivatives -- things like credit default swaps -- the investments built on shaky mortgages that helped spawn the economic crisis.
Congressman Peter DeFazio, a Democrat from Oregon, sponsored the bill in the House.
Peter DeFazio: This would help rein in some of this excessive, speculative trading -- the sorts of things that led to the meltdown on Wall Street.
DeFazio says small investors wouldn't be taxed. They could make a $100,000 worth of trades per year, tax free. The tax would be refunded for mutual funds and savings accounts like 401(k)s. DeFazio is aiming at speculators.
Loyola Law school professor Ted Seto thinks the tax would hit its target.
Ted Seto: You actually can make money if your trading program is just a little bit faster than the next guy's. What this would do is make that kind of trading less profitable.
Christopher Bergin publishes "Tax Analysts," a journal of tax information. He doesn't think the tax would pack enough of a punch to really deter speculators.
Christopher Bergin: And I think there are a lot of people who are angry, justifiably, at Wall Street, and I think this is a way to sort of vent. It might slow things down, but I'm a little dubious of that even.
Bergin says the transaction tax would have to be closer to 1 percent to really put a dent in speculation. But, he says, taxes have a habit of rising once they're approved by Congress, so the tax could eventually pack a punch.
In Washington, I'm Nancy Marshall Genzer for Marketplace.
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Not clear what they intend?
Equities, etf,etn, types of bond, money funds, mutual fund, transfers between core and money funds, dividends to core funds, cd, plus the myriad of derivatives?
Buy and sell!?
When could it start, presumably not before 2011?
Will the same tax rate be applied to senators on their "pork" projects??
A tax on trades is a great idea. Will it reduce the profitability on speculator activity? Probably yes. On the other hand failure to pay for the cost of the Republican overseas adventures for the last 9 years is bankrupting all of us. I believe that there is a history of taxing financial transactions for paying for WW1 and WW2. If traders operate on such a slim margin that 0.025% has an impact, I think that they will adjust to make fewer but more profitable transactions. As far as loosing workers in the financial industry, aren't most of the high volume transactions done by algorithms on unattended computers which sniff out small differences to edge out a minuscule profit. If no people are involved, how will it affect employment? Why is it that only Republicans are afraid to pay for the mess they created and want to pass it onto my great grandchildren. They should be man enough to be responsible for their mess.
#1) "market makers" aka goldman sachs will be exempt...so much for getting back at them #2)thousands and thousands will be laid off. NYC will be crushed. I do not mean 10 million $ a yr salary New Yorkers. I m referring to your average person who commutes from the uppermost reaches of westchester county down to the floor of the NYSE to execute trades for his employer (presumably a smaller brokerage firm), do back office tasks, etc. he/she earns an honest living. he will lose his job. 3)Throw out the #s defazio throws around that the tax will raise in revenue. It would be a fraction of that he claims due to the loss of the every day market participant (who, by the way, are just as much "market makers" as Goldman Sachs, Merrill Lynch or any of the others) 4)Calling every day market participators a "non productive" job is the most laughable and infuriating statement made throught out this whole debacle. When a trade is executed, revenue is made by the executing broker and the exchange which that particular security trades on. These firms and exchanges employ many many blue collaresque workers who are the furthest thing from Wall St fatcats. Furthermore volume and liquidity are the life blood of a healthy financial market. Taking them away from a market would be akin to trying to run an engine without oil. I wont even get into the disastrous consequences of larger spreads and drastically decreased liquidity. Taking a step back, outside of doctors, teachers, policeman, fireman, and preachers, who is really in a job that is giving back to society? lets take your average lawyer for example: Is all this ambulance chasing and frivolous medical and otherwise lawsuit filing really helping America? is driving up insurance premiums on literally everything helping the American quality of life and "givng back" to society? is that a "productive" job? When I go to buy a new car and I am cornered in a sales office by 4 car salesman trying to pressure mean into buying a car for more than it is worth, is that helping the amercian way of life? is that a "productive" job? You could literally go on for days and days with examples like these. Why are we singling out every day market participants who are actually doing a very productive job for the economy by supporting firms which employ many and by helping the financial markets operate with higher liquidity and tighter spreads. Mr Defazio, Mr harken, please take the time to do your homework before running your mouths on such matters which you are shockingly uninformed
I'm trying to get by investing & trading stocks until I can find a new job. Now they want to take this income stream away from me???? You're going to send me & millions of other out of work people who are buying & selling stocks right onto the unemployment roles. Why the heck are you trying to crush me my fellow Democrats?!?!?!
I'm a middle income main street guy. The furthest from a Wall Street guy that you can think imagine. I wear jeans with usually mud all over them & don't shave regularly. I have a blue collar job.
I would have to pay this tax as would every other middle income person who would want to buy or sell a stock.
If they want Wall Street to pay for Main Street, then why not tax the big Wall Street Investment Banks directly.
Taxing the middle class like this is WRONG!
Obama promised us no middle class tax increases.
What the heck is this?!?!?!?!
...and I'm a Democrat!!!
Take ¼% transaction fee on the typical turnover of mutual funds. Multiply compound that over 30 years. Your jaw will hit the floor as you see how HUGE of a tax this seemingly tiny percentage of revenue, not profits, on your long term savings will be. These few rogue politicians have come up with a way to create an INCREDIBLY HUGE tax bill with a very tiny percentage number attached to it.VERY, VERY SNEAKY!!!!
Sweden tried this tax in the 1970's and later repealed it because it caused a 60% drop in stock trading volume and resulted in significant layoffs in the financial services industry. The result was that the amount the tax raised was LESS than the capital gains tax and income tax revenues lost. Unfortunately, the desire for revenge against Wall Street has eclipsed experience and common sense. On the positive side, Senator Charles Schumer (D, NY) has come out strongly against the tax, as has Treasury Secretary Geithner. No Republicans will support it and many Democrats who have taken the time to research the unemployment effects are lining up against it. Conclusion: This tax will not be enacted any time in the foreseeable future.
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