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 Post subject: 0.25% Proposed Trader Tax - Stocks, Options and Futures
PostPosted: Sun Mar 08, 2009 4:09 am 
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Joined: Sat Jan 10, 2009 2:06 pm
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Location: Canada
Let Wall Street Pay for Wall Street's Bailout Act of 2009
Tax per trade. Trader alert.
Pay for the bail-out.
This guy against the tax makes great points!



Yahoo! News

Bill Would Tax Trades Of Securities
Sean Higgins Sean Higgins Mon Mar 2, 7:10 pm ET

In the midst of the worst bear market in decades, one lawmaker wants a tax on all securities transactions to pay for the $700 billion Troubled Assets Relief Program.

Such a measure would be a big negative for investors, especially active traders, experts say.

So far the bill is stuck in committee though. Capitol Hill insiders give it little chance for success.

Rep. Pete DeFazio, D-Ore., introduced the "Let Wall Street Pay for Wall Street's Bailout Act of 2009" last month. It would tax securities transfers, including stocks, options and futures. It does not specifically set a tax rate, calling on the Treasury secretary to do that. But it suggests 0.25% would do.

The bill has seven co-sponsors, all Democrats. DeFazio's office didn't respond to requests for comment.

On the House floor in February, DeFazio cited "obscene executive compensation" as TARP's problem.

DeFazio, who opposed the original TARP legislation, cited a precedent for the tax: one existed during the Great Depression.

"A modest imposition of a transfer tax -- something we had from 1917, it was doubled during the Great Depression and only expired in the sixties -- a transfer tax of up to one-quarter of 1%, something the British have on the London Exchange, would raise about $150 billion a year," DeFazio said.

There seems to be little interest in Congress. The bill hasn't moved since going to the House Ways and Means Committee. "Nothing is currently scheduled," said panel spokesman Matthew Beck.

"I doubt it is going anywhere," said a GOP staffer.

But if passed, industry experts say it could harm Wall Street.

A 0.25% trading tax "seems deceptively small, but I think it would have a significant effect on trading activity," said J.W. Verret, a professor at George Mason University who specializes in securities law.

A person with $500,000 that made 100 trades of $100,000 in a year would face a $25,000 tax.

Even in a recession, Verret notes, hedge funds account for about half of all trading activity. Many operate on tiny margins per trade, relying on huge volume and leverage for their returns. A transaction tax could simply spur institutional funds to shift trading overseas.

"So I think that it will have a much more significant impact on trading than people are suggesting," Verret said. "And pulling down trading during a recession is the last thing you want to do. Liquidity is a prerequisite for recovery."

Securities trading profits already are taxed as capital gains, he notes. So reducing volume would, ironically, cost the government revenue.


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