Everybody wants to tax what does not apply to themselves. If you are a non-smoker, you want cigarettes to be taxed as high as possible.
There is at least some logic behind a tobacco tax. Many users end up getting treatment for smoking-related illness... paid for with tax payer money. There SHOULD be a high tax on tobacco... the higher the better.
You answered your own question and still don't understand? Problem is that you are making goodwill assumptions. The tax would not make itself obsolete, it would accomplish exactly what it intends to do.
Problem is that we have way too many politicians that are poll driven. I read a few of the comments at the article, and seems like many people like the idea. A lot of people have been hurt in the market in ways they have never been hurt, and any measures to punish the players now will be very popular. The politicians will not be concerned with traders who are actually ethical and about business. They will seek to punish all because that's what the uneducated masses want.
If this thing starts getting traction in congress, I hope our brokers and exchange officials will fight it. They will have to figure how much money they will lose if the tax passes, and then lobby with an amount less than that. And if that doesn't work, the tax will pass.
Then all the big "prop" shops will become BD's and all their trades will be exempt too. There are ways to circumvent almost any rule.
Why did the idiot propose only 1/4% Tax ? Why not 10%? He must feel that a big tax might be a problem but how did he figure that 1/4% Tax is OK? If you are successful trader you better hide your money from the masses. One day they will come for you. The Gods have decided that Paranoia is what we deserve. It surrounds a treader from everywhere.
Such legislation doesn't just tax TRADERS, but also INVESTORS . . . . with the twisted DeFazio "logic" of having to create some way to raise revenues in order to pay for the $700 billion dollar "Wall Street" bail-out. As a result, the "Little Guy" gets screwed as well ( unless they impose some sort of a back-ended tax based on your holding period ). I still don't think any kind of tax like this will fly. Moreover, half of that $700 billion is going to wind-up being spent in a much different manner than the "top-down" direct investment approach that Paulson used. Larry Summers ( and others ) are bright enough to know that a transaction tax will distort the market. Even Dean Baker ( the economist that the NY Times writer Bob Herbert cites ) knows full well that Summers has yet to advocate any policies that would cause serious pain to Wall Street. http://www.prospect.org/csnc/blogs/...2008&base_name=larry_summers_as_fearless_trut
That's what they did in UK. But in effect, it means MORE regulation for the prop shops and more costs. Few of the prop shops will be able to make the change. You also assume that the regulatory agency will be lenient in approving new B/Ds which will qualify for the exemption. It will be just like with the naked shorting rules, the market makers can do what they want, the rest can't.
Oh $hit! "More recently, following the U.S. stock market crash of 1987, the idea of using transactions taxes to curb speculation received support from Joseph Stiglitz (1989), the former chairman of the U.S. Council of Economic Advisers and former chief economist of the World Bank. It also received support from Lawrence Summers (Summers and Summers 1989), the recent U.S. Treasury secretary. The bottom line is that the Tobin tax has a highly respectable intellectual heritage. Though this background does not make the Tobin tax necessarily right, it does dispel the notion that it is an outlandish idea." http://findarticles.com/p/articles/mi_m1093/is_3_44/ai_75532962 It seems every time there is a crash or a steep decline this idea will pop up!