ksharmon
Registered: Nov 2009
Posts: 216 |
11-25-09 05:27 PM
Jeffrey V offers his thoughts
http://www.rallycongress.com/greent...#comment-595035
If this bill is passed, it will have unintended consequences that are hard for the proponents of this tax to believe. To begin with, every ordinary citizen who owns mutual funds or other financial assets will have their wealth destroyeed further than has already happened. This wealth-destruction will end up costing jobs and destroying tax revenues.
Further, a transaction tax would fail to achieve its purpose because transactions would dry up (think Laffer curve). In the process, it would further destroy financial liquidity in our markets and available capital for businesses. (Think of what happened when liquidity dried up in the credit markets in late 2008. Think again before voting for a transaction tax) In addition, as soon as the bill looked likely to pass, there would be a horrid rush to get out of the markets because the tax would reduce the value of assets, and there would be a mad scramble to "get out of the theater" and preserve whatever personal wealth that has not already been destroyed. When this happens, the resulting bear market would further destroy wealth, hitting the consumer further, causing additional job loss and AT LEAST a double-dip recession - one that the Administration would be unable to do anything about because they will have already used their resources to support the current fledgling recovery, and because the government would lose at least 100X as much revenue than the tax would garner due to the reduction of income, both corporate and individual.
Furthermore, if DeFazio and his ilk succeed, there will be a massive centrist backlash against those who support such a tax. Think what happened to the Hoover Administration - in reverse.
Those who taught themselves to trade in our financial markets because they were unable to get jobs are prime examples of the American ingenuity that made our country great. These people include those who are making a good living, and others who are stay-at-home mothers with mouths to feed and retirees on fixed income trying to eke out a bit of additional income on very narrow margins (including core constituents of office-holders like DeFazio). Those who demonize "Wall Street" should consider that the vast majority of people who profit from stocks, bonds, and other financial instruments (including mutual fund and retirement investors) are ordinary citizens trying to find a way to prosper, not scoundrels who deserve to be demonized.
Furthermore, such a tax would strike a blow at the very economic system that has made our country great. Businesses are motivated to make profit, and are rewarded in our financial system by having their stock rise and having their debt graded higher and more easy to obtain. A transaction tax would diminish the value of their stocks and make capital more difficult to obtain. So this tax is qualitatively different than an income tax.
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