DeFazio wants to curtail speculative activity that causes commodities to needlessly go up in price. He's focused on oil in particular. Speculative activity in self-contained ecosystems like casinos, sports, etc. doesn't drive up prices for our daily necessities. Also, casinos in NJ are taxed on their gross revenue. 8% of what you feed into the slot machine is sent to the government. Lotteries are run by the govt and generally pay out 50% of their revenue, so that's essentially already a tax.
The PDT rule was to protect brokers who ran the risk of having small daytrading clients blow out their accounts but had very little compensation otherwise - a daytrader doesn't generate much in margin interest, and small account daytraders don't have much in their account for the broker to lend out to others. Any assumption that it was meant to prevent bubbles in the future is off the mark.
If someone buys $550K worth of a single stock, he is not an average or small investor. The average investor buys mutual funds; mutual funds are exempt from the tax.
If is concerned about oil in particular, when why tax all equity transactions? Furthermore, I find it amusing that DeFazio had so many complaints about speculators when the commodities went up in price. Where was his complaint about the speculators when the commodities went down in price? As I recall, nobody said a peep when oil went down.
Exactly. That makes no sense. If you're really worried about rising commodity prices, why would the tax rate for equities by 10x that of futures contracts? Also, I love how people who have no clue about how markets work, absolutely detest "short sellers" on stocks, etc, but then they turn around and hate people who are long commodities. These people act like traders only trade in one direction The fact is, oil traders will gladly ride oil down to $10/bbl if they're short. Most traders except your perma-bears will gladly ride the Dow to 30,000 if that is the direction of momentum.
Mutual fund returns will also be hit as liquidity providers will be hit wit the tax and will price it into the spreads. Of course, many have postulated that an exemption for large B/Ds would be slipped into any "final version" of the bill, under which (likely) scenario everyone gets exemptions from the tax except individuals who choose not to invest in mutual funds, with their high fees (relative to mean performance) and mediocre mean returns. Perhaps this bill should be renamed "Rewarding Wall Street by Punishing Small Investors for Big Banks' Mistakes".
Great posting. Most people currently hate "Wall Street" and they naively think this tax will hit "Wall Street" where it hurts. In reality, the big boys that they are after will either get exemptions from this tax or they will simply pass this tax along to the average individuals. Of all the misguided taxes, this one takes the price.
He has proposed multiple bills. The one targeting oil trading is described at http://www.defazio.house.gov/index.php?option=content&task=view&id=490 . Here is a cringeworthy quote:
Very true, but remember the constituents in most of the country want a stock market and a housing market that go up faster than inflation, and a food and oil market that go up slower than inflation.