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| reply to amigo_boy
Re: Obama's Jobs Tour a PR stunt - don't expect jobs I don't believe a 1/10th percent transaction tax for 4-5 years would discourage investment significantly. As mentioned earlier, we had such a tax between 1914 and 1964. Looking at a chart of S&P 500 there was no noticeable positive effect on the elimination of the tax in 1964.
If it were me, I would probably exclude 401k and IRA trades as well as the first $100k in taxable trades. I think that would help target the transaction tax on the high-volume traders which it intends.
One argument against transaction tax:
If the tax would not be 'noticeable', meaning not expected to change behavior, then why have the tax in the first place?
My second argument that I thought of:
That .1% tax would add up. Traders would pay it when they buy and when they sell. It would hurt the strategy of incrementally increasing or decreasing positions as prices adjust and be an incentive to go 'all in' or out with each trade.
Dividend reinvestments are technically a transaction that could be affected.
Assuming an investor expects 7.5% return, that .1% of the total trade would still assign a significant amount of profit to the government.
It would also provide an incentive for multinationals to trade on foreign stock exchanges to avoid that tax.
Though I appreciate that my 401k and low-volume of trades would not be subject to the transaction tax and that the tax amount seems low, I think there would be other unforseen and negative implications. | |
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 ·magicjack.com
| said by hoyleysox:If the tax would not be 'noticeable', meaning not expected to change behavior, then why have the tax in the first place? Read the law. It says that it's only purpose is to repay the TARP funds (which haven't been repaid yet). The tax stops when the funds are repaid. But, it remains on the books and could be used again the next time we have to intervene (which is a matter of "when," not "if.").
The response at this point should be, "but traders didn't cause the meltdown." I know. I agree. But, they're closer to the market (and presumably benefit more from it due to their use of it, otherwise they wouldn't use it) than the general population. So, it's "less wrong" to impact them than everyone.
I don't really like it. I wish we didn't have to have taxes on anything and we'd all sing the Coca-Cola song. But...
said by hoyleysox:That .1% tax would add up. Traders would pay it when they buy and when they sell. It would hurt the strategy of incrementally increasing or decreasing positions as prices adjust and be an incentive to go 'all in' or out with each trade. Actually, if you read the law, the transaction tax is applied to trading facilities. Not to traders. It would be up to them to pass it on, or absorb it as part of their operations (such as Goldman's $21 billion bonus pool).
I agree with you. I wish we didn't have to have it. But, millions are unemployed and all of a sudden Obama's worried about bankrupting the country. So, he's turned stimulus-light. If we can get that TARP money back, that would be a little more to use to help out the people who, unlike Goldman, haven't returned to their former glory.
You're right that if the tax is passed on to traders it should inhibit the practice "scalping." Round-trip trades that profit from small movements in price. Often highly leveraged to compound the fractional profit.
I don't know if that would be good or bad. It could decrease liquidity, increasing the bid/ask spread. I don't know if that's necessarily bad either (except to the scalper). It just changes the calculus.
Like I said, we didn't see any volume difference in 1964 when a transaction tax was lifted. We didn't have day traders then. But, it should have had some effect (if we're to believe it will have a significant effect today).
It's really a backdoor attempt to make the big Wall Street firms repay TARP by taxing their "quant" platforms which engage in high-speed trading.
Mark | |
| Correct me if I am wrong, but I believe that almost all of the companies that received tarp funds have paid it back or announced that they will pay it back soon, exceptions being citigroup, GM and Chrystler, who apparently cannot afford to pay it back and would be weakened further by a transaction tax.
A transaction tax would not be cataclysmic and its effects on investor behavior would be subtle, but I do not think it would bring a positive effect, aside from increasing tax revenue. If the goal is simply to increase tax revenue, I do not see how it would be preferrable to raising income tax or capital gains tax, which I am not in favor of either.
I do not consider the discouragement of speculative investments to be a worthy goal - too much of our economy is based on consumption, not investment. | |
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| said by hoyleysox:Correct me if I am wrong, but I believe that almost all of the companies that received tarp funds have paid it back or announced that they will pay it back soon I don't know. I googled and found this article from August:
quote:
The bottom line: Taxpayers put $204.4 billion into the banks through CPP and have received $70.2 billion in principal, ... Today, 633 banks still owe the Treasury $134.2 billion.
-- »www.slate.com/id/2226517/
Maybe you can search for more recent info.
Either way, if there's not much left to repay, then the transaction tax wouldn't last long.
Mark | |
patcat88
join:2002-04-05
Jamaica, NY
kudos:1 | reply to hoyleysox
said by hoyleysox:Correct me if I am wrong, but I believe that almost all of the companies that received tarp funds have paid it back or announced that they will pay it back soon, exceptions being citigroup, GM and Chrystler, who apparently cannot afford to pay it back and would be weakened further by a transaction tax. Thats only of the "major" firms as defined by MSM. | |
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