1/4% Tax on all stock trades pushed in NY Times today

No wonder he joined the political ranks. VP at GS is like head clerk. It says Latin American tech group, probably an ADR stock loan/syndicate guy. I remember when I was a kid I came home and told my dad I got promoted to Vice President at Wall Street firm. He went ballistic. He thought I was the #2 guy at the whole firm. VP is the next level after clerk, like corporal.

I'll give it a shot though. Seems like someone there is reading his e-mails and letters.

 

The BBC seems to have taken our message on board, at least the bit we worked on. When reporting Brown's contribution at the Copenhagen summit, during the news bulletin at the top of the hour the reporter of the The Radio 4's flagship 'Today' programme, mentioned The Tax as the *last* of the three alternatives, saying "..or putting a tiny tax on financial transactions, a Tobin tax"... Notice the change? So the good news is that they did delete at least one populist spin - it is no longer a tax on *bank* transactions.

That's apart from several pieces spread throughout the week (starting with 3 on Saturday), which seemed to repair the image of the financial industry. These included the absurd comparison of social usefulness of hospital cleaners and City bankers (the reporter pinned the 'researcher' saying that she 'gives herself away' by putting an equally low valuation on the marketing execs contribution to society: 'who are you to say what is overconsumption'), but also the advertising for bonds (during which carefully no mention was made to 'trading' them, and their social usefulness for the third sector as a fund-raising method (which is currently being promoted by the UK Gov't). Not to metion that the bond markets were also shown to be the main source of funding for the Gov't itself... and the report mentioned 'pension funds' (read: the good guy) as those providing the money to finance Brown's borrowing. Tax on bonuses was termed to be 'economically illiterate' (good selection of sources), which it is, because any below-market price creates excess demand... empty shelves were mostly due to the socialist countries keeping such artificially low 'affordable' centrally-controlled prices... coming soon to a bank near you. This pro-financial markets attitude is in a stark contrast to the previous week, when you got plenty of 'transaction tax gathering momentum' reports (currently there's a marked silence on the subject, at least the frequency has decreased), and very radical left-wing 'thinkers' getting airing, calling for The Tobin Tax AND the return of Glass-Seagal 'at the very least', but not stopping short of... total nationalization of the banking industry (yes, you've heard it correctly - that was during last week's 'Thinking Allowed').

But the bad news is, that the 'tiny' tax spin is still repeated parrot-style from the unions marketing materials, and this 'tiny' bit is the next target I will be focusing on. Which should be easier, because I have a short calculation at the ready, showing that this 'tiny' tax would in fact place a disproportionately heavy burden, roughly 100 times higher than sales taxes imposed on Main Street, and I took the representative markup for Main Street businesses directly from one of the BBC's interviews for the Bottom Line programme (the presenter linking it with the Today programme).

 

This is a paper from the european parliament from dec 3:

http://www.europarl.europa.eu/sides...rence=20091203IPR65915&format=XML&language=EN

Not many arguments against the tax.

On a side note, Barroso defended again ( briefly )the TT on euro parliament yesterday.

 

more on Barroso here

EU Pushes for Global Tax

http://www.thetrumpet.com/index.php?q=6811.5326.0.0

uropean Union leaders have called for a new global tax on financial transactions to prevent banks from taking excessive risks that could bring about another financial crisis.

European Commission President José Manuel Barroso last Friday urged the International Monetary Fund to implement the so-called “Tobin Tax” in order to limit risks in the financial sector.

The tax is named after American economist James Tobin, who was the first to propose the idea in the 1970s. Tobin believed that cumbersome accounting requirements would prevent the tax from being implemented, but modern technology has made the idea feasible. In the suggested framework, a modest amount, ranging from .005 percent to 1 percent per trade, would be taxed. The effect of the tax would be slight for ordinary investors who make only occasional stock transactions, but high-speed speculative trades, which are generally the most risky, would be considerably slowed.

The push for the tax came at the end of a two-day summit of EU leaders in Brussels.

 

Can banks save the planet?

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/12/can_banks_save_the_planet.html

 

CLIMATE CHANGE: The Many Lives of the Tobin Tax

http://www.faxts.com/index.php?opti...ives-of-the-tobin-tax&catid=105:breaking-news

 

Lynn Stout backs transactions tax

(Professor of corporate and securities law at UCLA)

http://www.pbs.org/newshour/updates/business/july-dec09/econyearahead_12-15.html

Perhaps the most unexpected economic development we could see in 2010 would be the U.S. adoption of an excise tax on short-term trading in financial instruments....

Traders typically defend their chosen profession by arguing that short-term trading adds liquidity to markets, and makes sure securities prices accurately reflect the latest information. However, there is shockingly little hard evidence to support the notion that average investors really get much value from such "benefits."

Meanwhile, logic suggests long-term investors don't need 100 percent annual stock market turnover to be confident of selling their shares when they retire. Nor do they benefit much from "flash" trading that moves information into prices only a fraction of a second faster than it would otherwise arrive.

<i>Please note that there is a place for comments--chime in</i>.

http://www.pbs.org/newshour/businessdesk/2009/12/the-year-ahead-economic-surpri.html

also paul solman likes her argument

 

Stout is really ignorant or brain washed.

 

Futures Traders

Here is a copy of the bill introduced this month. All of those writing that futures contracts will be taxed at .25% are wrong. The tax would be .02% if passed. That is a significant difference. Again I am not for the tax at all. Iam just trying to correct some misconceptions written in this thread.

http://www.govtrack.us/congress/billtext.xpd?bill=h111-4191

SEC. 4475. TAX ON SECURITIES TRANSACTIONS.

‘(a) Imposition of Tax-

‘(1) STOCKS- There is hereby imposed a tax on each covered transaction in a stock contract of 0.25 percent of the value of the instruments involved in such transaction.

‘(2) FUTURES- There is hereby imposed a tax on each covered transaction in a futures contract of 0.02 percent of the value of the instruments involved in such transaction.

‘(3) SWAPS- There is hereby imposed a tax on each covered transaction in a swaps contract of 0.02 percent of the value of the instruments involved in such transaction.

‘(4) CREDIT DEFAULT SWAPS- There is hereby imposed a tax on each covered transaction in a credit default swaps contract of 0.02 percent of the value of the instruments involved in such transaction.

‘(5) OPTIONS- There is hereby imposed a tax on each covered transaction in an options contract with respect to a transaction described in paragraph (1), (2), (3), or (4) of--

‘(A) the rate imposed with respect to such underlying transaction under paragraph (1), (2), (3), or (4) (as the case may be), multiplied by

‘(B) the premium paid on such option.

‘(b) Exception for Retirement Accounts, etc- No tax shall be imposed under subsection (a) with respect to any stock contract, futures contract, swaps contract, credit default swap, or options contract which is held in any plan, account, or arrangement described in section 220, 223, 401(a), 403(a), 403(b), 408, 408A, 529, or 530.

‘(c) Exception for Interests in Mutual Funds- No tax shall be imposed under subsection (a) with respect to the purchase or sale of any interest in a regulated investment company (as defined in section 851) or of any derivative of such an interest.

‘(d) By Whom Paid-

‘(1) IN GENERAL- The tax imposed by this section shall be paid by--

‘(A) in the case of a transaction which occurs on a trading facility located in the United States, such trading facility, or

‘(B) in any other case, the purchaser with respect to the transaction.

‘(2) WITHHOLDING IF BUYER IS NOT A UNITED STATES PERSON- See section 1447 for withholding by seller if buyer is a foreign person.

‘(e) Covered Transaction- The term ‘covered transaction’ means any purchase or sale if--

‘(1) such purchase or sale occurs on a trading facility located in the United States, or

‘(2) the purchaser or seller is a United States person.

‘(f) Administration- The Secretary shall carry out this section in consultation with the Securities and Exchange Commission and the Commodity Futures Trading Commission.’.

(b) Credit for First $100,000 of Stock Transactions Per Year- Subpart C of part IV of subchapter A of chapter 1 of such Code is amended by inserting after section 36A the following new section:

 

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/12/can_banks_save_the_planet.html?s_sync=1

Can banks save the planet?

Robert Peston | 12:18 UK time, Wednesday, 16 December 2009

If the current entente between G Brown and N Sarkozy ruled the world, we would be well on the way to a global tax on financial transactions.

In a recent joint statement, the unlikely double act said that the "revenues from a global financial transactions tax" - perhaps better known as a Tobin tax - could help defray the costs of transition to a low-carbon economy, especially for developing countries.

It's a live issue at Copenhagen, partly because - I suppose - the notion of a Tobin tax to pay for ecological rehabilitation is something of a blast from the past, a golden oldie beloved of the green movement.

You might call it a bit of ideological recycling.

So the Treasury's latest thinking on such a transaction tax is worth knowing about, you'd think.

And as luck would have it, the Treasury has published a paper - called "Risk, Reward and Responsibility: the financial sector and society" - which is about how superfluous financial dealings could be taxed and also how banks could be forced to make a greater contribution to the costs of clearing up after them.

Some would say (but I could not possibly comment) that the paper is a bit disappointing - because it is a miscellany of unconnected arguments rather than a rigorous analysis of the costs and putative benefits of either levying a worldwide tax on financial dealing or of charging banks for the de facto insurance against collapse that taxpayers provide to them.

What's most interesting - I guess - is the political statement represented by the paper, which is that such levies are very much on the government's agenda.

That said the Treasury is clear that this is not an area for unilateral national action, that such taxes or charges won't be imposed by the UK unless other G20 nations do the same (10 Downing St is a little less robust on this all-or-none approach).

The Treasury fears - after the horse has bolted, some might say - that an exclusively British charge on banks would cause undue harm to our financial services industry.

So it would need to be confident that Switzerland and the US would implement equivalent taxes before putting its paws into our banks' pockets again.

Hmmm. How likely is it that tax-loathing Switzerland, Singapore and the US will ever sign up for more taxes on banks, even to save the planet?

Well it would be a bit more likely if proponents such as the Treasury could furnish detail on what would be taxed, how and why.

The gaping hole in the Treasury's paper is any analysis of which financial transactions may be gratuitous - or "socially useless" to use Adair Turner's resonant phrase - or even potentially destabilising for the economy.

If such transactions could be identified with confidence, then taxing them might be harmless to the prospects for sustainable economic growth or even a good thing.

All that the Treasury trots out are the same old stats showing the exponential growth of financial transactions in recent years.

For example, it mentions that the outstanding gross value of over-the-counter derivatives rose from less than $100 trillion dollars in 1998 to almost $700 trillion in 2008 (or more than 10 times the value of everything the world produces per annum).

Now it's not ludicrous to conclude that a big chunk of those transactions were either designed to transfer wealth in a sophisticated gull from naïve investors to clever bankers, or to avoid tax, or to manufacture fees out of products with no serious underlying purpose.

It is also arguable that a proportion of those deals have not had a net smoothing effect on markets as a whole but have increased the volatility of share prices, and commodity prices and debt prices - in a way that may actually have damaged the interests of genuine wealth creating companies in the real economy, by making it harder for them to plan.

But although such intuitions may be reasonable, intuitions are no basis for levying a new tax.

What would be required is solid data.

It would be useful to know how many of these derivative transactions were 'naked' speculation rather than hedging of real-economy deals by non-financial businesses.

Take credit derivatives, those notorious de facto insurance contracts against debt defaults.

Only a minority of the $50 trillion odd of these that are extant are hedges for actual holders of debt. But what is the precise size of what some would see as these legitimate hedges, as opposed to the more speculative deals?

Similarly, what proportion of all derivatives have as their primary purpose tax avoidance?

Unless and until such data can be collected, the debate on whether a transaction tax could or should be implemented is probably going nowhere.

The point being that not all financial innovation is either harmful, fatuous or a gull.

In this context it is worth noting the almost hysterical reaction of big non-financial companies to the supposed cost implications of relatively anodyne proposals to route all derivative contracts through so-called central counterparties.

You can imagine the response of such businesses - not banks, but energy companies, telecoms outfits and so on - to the idea that they would be hit by the Tobin tax.

Which is not to say that we won't eventually see a transaction tax whose proceeds can be deployed for a grand social purpose.

But the tax is so amorphous right now that - surely - it can't be the financial glue at Copenhagen to unite developing and developed nations, even if it is a bond between France and perfidious Albion.