http://www.spiegel.de/politik/deutschland/0,1518,668989,00.html horst seehofer (csu), head of the german state of bavaria, supports the introduction of a financial transaction tax on an international basis.
No, they are not taxing the % of your capital, but a % of the trading vehicle. It is deadly with leveraged instruments like futures. Also this tax is on both buy and sell, so you pay on both sides like an extra huge commission. You have to pay it even if you don't make any money on the trade, even if you lose money on the trade! This is what makes this tax so deadly. With this tax, it is hard for seasoned traders to stay in business, almost impossible for newbie traders to get over the learning curve.
I was agreeing, hence why I said participation fee as a true tax would only be on your profits or profitable trade. As for futures, the tax is at .02%, not much better but its not .25% with 10:1 leverage or whatever. Any one have any idea of the .005% tax that is proposed on a global scale would allow a lower rate on FX futures etc.?
Why Concern is Still Warranted Irwin Stelzer in tomorrow's London Times They will also remember 2009 as the year that class warfare reared its ugly head in a country long free of the divisions associated with that European disease. Of necessity, the government devoted its resources to bailing out Wall Street while the unemployment rate, home repossessions, and hard times hit Main Street. No use explaining that the financial system had to be saved so that it could again extend credit to small businesses and worthy consumers, not when the bankers, having been saved by the taxpayer, used the first sign of profits to vote themselves enormous bonuses for, according to the head of Goldman Sachs, doing âGodâs workâ. Little wonder the president sees political profit in attacking âfat-cat bankersâ. The good news is that this âus versus themâ attitude emerges periodically in America but rarely survives after needed reforms are made. Unfortunately, we now have the toxic combination of extraordinarily insensitive bankers, a president determined to âtransformâ American society, a swollen army of government employees, and congressional leaders sufficiently to the left of mainstream America to make it uncertain that envy can once again be pushed to the margins of American political life. Be afraid, be very afraid. http://business.timesonline.co.uk/tol/business/columnists/article6968380.ece
Yes, tax on the capital involved in the trade is what I meant (see original post). But still, if you have a total capital of $100 for trading, and each trade is $10, you do 10 trades a day, then you effectively will be taxed 0.5% per day on your entire capital of $100. If you don't make an EXPONENTIAL return, you'll be out of business in 200 days or less.
A blog against the tax from November 8 referencing a number of studies by others (I don't think this has been posted before, but apologies if it has): http://stumblingandmumbling.typepad...bling/2009/11/against-a-transactions-tax.html (NOTE: I've pasted the article below but it's not including the reference URLs. Click the article above if you want the references ) Against a transactions tax Gordon Brownâs proposal for some sort of transactions tax seems to have been rejected by Tim Geithner, which means the idea is, in effect, dead: such a tax is only remotely feasible if applied globally. This is good. There are (at least) three arguments against such a tax. 1. It would have done nothing to have stopped this financial crisis, and might even have made things worse. The two markets upon which a tax would impinge most - FX and stock markets - played little role in this crisis; they were, as near as dammit, innocent bystanders. The tax would not have stopped RBS overpaying for ABN-Amro, would not have stopped HBOS making bad loans, and probably wouldnât have stopped Northern Rock funding its mortgage lending by borrowing in wholesale markets. What the tax might have done, though, is reduce the liquidity of mortgage derivatives. But this was, for many banks, precisely the problem. As Alistair Milne describes in The Fall of the House of Credit, the problem with many âtoxic assetsâ is not so much that they were devalued by defaults, but rather that they became illiquid, untradeable. A transactions tax might have exacerbated this problem. The only way such a tax might have helped is that it might have deterred mortgage securitization in the first place. 2. A transactions tax does not necessarily stabilize markets. It might do the opposite. As Andrea Terzi points out (pdf), such a tax doesnât so much reduce short-term trades as trades with low expected gains. However, these trades are often stabilizing trades - those done by arbitrageurs hovering up pennies. If the tax bears more heavily upon these than it does upon noise traders, then it might make bubbles more likely, not less. Note that short-term measures of volatility donât help us decide how great his danger is: if prices rise 1% a day, then daily volatility is zero - but weâll soon have the mother of all bubbles. This paper (pdf) discusses the issues here 3. Tim is right. The burden of a transactions tax doesnât necessarily fall upon evil bankers. If people anticipate lower liquidity when they come to sell, theyâll not pay such high prices now. The effect of a tax will then to be depress prices now, as Bank of England research suggests. In this sense, a tax bears upon people sensitive to current share prices - such as those coming up to retirement - rather than traders. If these objections are valid, you can draw two possible inferences. Standard libertarians might say that interventions in markets are (often) ineffective or counter-productive. Leftists, though, might show that it just shows that the financial system needs much more radical change than merely new taxes. November 08, 2009
Bloomberg Interview: Schumer Urges Wall Street To 'Get That Money Out There' To Buoy Recovery. http://www.bloomberg.com/apps/news?pid=20601070&sid=aaqerszXOPMU It mentions nothing about the trader tax proposals, but it would have been a great idea to have asked him his views. But at least we know he isn't dead, and is starting to talk about wall street, so hopefully he'll start working on killing these trader tax proposals.
Mayor Bloomberg defended financial service jobs on Meet the Press today. Explaining that Wall Street is integral to NYC's economy. He said it makes no sense for everyone else to attack financial services and others should turn the tide back to being supportive and not populist.
MAYOR BLOOMBERG: You know, we have--everybody is bashing Wall Street. That is one of the big revenue generators for New York and New York City. That's how we pay our teachers, that's how we pay our cops, that's how we pay our firefighters. And I've always thought, if the elected officials in Michigan bashed the automobile industry, or in California, I.T., or in Texas, oil, they'd be run out of town on a rail. And yet, every day I pick up the paper and everybody, it's kind of hard to find anybody that's not saying--well, look, there are some excesses. But overall, most of the people that work in finance make $70,000, $80,000 a year, they're hardworking, and we want those industries to be here and not overseas.
http://business.timesonline.co.uk/tol/business/economics/article6968448.ece No mention of a TT but it seems UK economists don't like Browns policies or lack there of. "The Conservative party should set out its intentions before the election, they say. âThis would give voters and markets a clear choice between a governing party prepared to indulge in risky procrastination about the scale of Britainâs fiscal problems and an opposition prepared to take the necessary action,â they conclude"