Wall Street tax still in play
One of the hottest topics on the blog lately has been the proposal to tax Wall Street transactions such as stock trades. At first, I thought this had little chance of passing, but there may be some momentum building.
“I believe the transaction tax still has a great deal of merit,” (House Speaker Nancy) Pelosi said, and if agreement can be reached among the G-20 nations, “It is really a source of revenue that has really minimal impact on the transaction but a tremendous impact on helping us meet our needs.
“I think there would be a market for it among the American people to say that we are all participating in the economic prosperity of our country and we are all pitching in to continue that prosperity.”
(Democratic Senator Tom) Harkin said the measure was not intended to punish Wall Street. However, he and others in Congress have been very critical about how the industry was seen as spending the $800-billion bank bailout passed last year.
“I don’t look upon it as any kind of way of punishment or anything like that,” Harkin said. “I mean, we’re just looking for revenue. We’re looking for ways of getting out of this hole we’re in.”
A hole dug by bailing out Wall Street. That’s not in some measure, retribution?
Obviously the business lobby is against this, but one key voice on the subject will be Treasury Secretary Tim Geithner. Geithner made a comment recently that seemed to indicate he opposes a transaction tax, which I assume he would, but when reporters asked the Treasury to clarify his position, there was no comment.
When I posted on this last week, there was a heated discussion in the comments section. Day traders said they wouldn’t survive. Others worried about the ripple effects a transaction tax might have on jobs (despite Pelosi’s contention). But there was at least some support for the idea.
A couple of the arguments that were posted:
Speaking as a British National…this tax would be disastrous if it was passed. Liquidity in the US financial markets would drop like a stone overnight. The major damage would occur in the products used by companies, government entities and individuals for hedging risk such as futures and options in commodities and financial products. It would become impossible for any trader of these products to eek out a living when he/she is being taxed on every transaction as opposed to being taxed on the profits that he/she makes.
Personally, I favor some kind of trading tax on stocks that are sold from a portfolio, including stocks sold by pension plans, insurance companies, and the like. Perhaps the tax could be graduated: Stocks held less than an hour, 1-percent tax; stocks held less than a day, 0.75-percent; stocks held less than a week; 0.7-percent; and so on. Stocks that are held at least 5 years could be sold without being taxed. My reasoning is that more effort would be expended in evaluating the long-term value of a company.
We’ll be delving into this tonight on Marketplace. I’d love to keep the discussion going here…
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