Dems consider tax on big stock trades

Nancy Marshall-Genzer Dec 4, 2009

Dems consider tax on big stock trades

Nancy Marshall-Genzer Dec 4, 2009


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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