Vote against trading tax!

Discussion in 'Taxes and Accounting' started by notborrowable, Feb 19, 2009.

  1. bump - keep this going
  2. think what markets will do! liquidity will fall like a knife may come out like a real catastrophy if this goes thru
  3. "Oh! The Humanity! We will have to find a real job!"

  4. Let them di it , this is the olny country , where big crooks get away with this shit.
  5. Synonym


    I don't suppose there is a way for non-US residents to also make their opposition to this heard is there?

  6. Contact Ways & Means Committee:
    (Contact in upper right corner of page)
  7. Synonym


    Thanks for the reply, but i've caused some confusion. What i actually meant was, is there a way for a resident of another country who trades the US markets to make their opposition heard?
  8. Please note that apparently Congressman Peter DeFazio has been trying to introduce a transactions tax since 2000.

    So his motivation for this tax has been rather permanent and doesn't really have anything to do with TARP. In that respect, the whole premise of the bill is misleading.

    Here's the text of the letter I submitted to my Congressional representatives. I based it on Rev Shark's excellent letter and added a number of points:

    On Friday, February 13, your colleague, U.S. Congressman Peter DeFazio, introduced H.R. 1068: “Let Wall Street Pay for Wall Street's Bailout Act of 2009”, which aims to impose a 0.25% transaction tax on the “sale and purchase of financial instruments such as stock, options, and futures.” Without a doubt, many Americans are appalled at the reckless behavior of large Wall Street companies, and the notion of making those who are responsible for putting the global financial system in jeopardy help repay taxpayers for bailing them out is certainly justifiable.

    Unfortunately, I feel that this proposal is the wrong way to do that, as this tax applies to all investors, the vast majority of whom have done no wrong. Effectively, this tax will punish anyone who wants to save their money, whether it be by investing in stocks or options directly, putting their hard earned money in any mutual fund, or by simply placing a portion of their paycheck in a 401K. There’s no doubt that banks and mutual funds will pass along this added cost to their customers, giving this proposed tax a much further reach than was initially imagined.

    Moreover, the unintended consequences associated with H.R. 1068 are also hard to ignore.

    First, many hard-working Americans make their livings by running small businesses that trade stocks, options and other financial instruments. Many of whom will be put out of business due to the fact that their margins are often quite thin. In addition, those who work for or with these individuals will also lose their jobs.

    Second, a transfer tax such as this will lower capital gains dollar for dollar, making the notion that anyone who invests their money will be on the hook for the excesses of Wall Street all that more poignant.

    Third, such a tax will undoubtedly affect the number of shares traded on an absolute basis, thus reducing liquidity – a necessary ingredient in the effective pricing of assets. It’s the complete lack of liquidity, for example, which made collateralized mortgage obligations effectively worthless.

    The high liquidity and low transactions costs of the US capital markets make them a very attractive place to list companies and trade commodities. This attractiveness is a driver of the US financial industry which provides jobs to Americans and capital for American companies. The attractiveness and competitiveness of the US capital markets also contributes to the ability of the US to influence and lead the global economy.

    Importantly, the attractiveness and competitiveness of the US markets also has a virtuous effect on the strength of the US dollar, as foreigners wishing to trade in the US markets need to purchase dollars in order to do so. All else being equal, this makes the US dollar stronger.

    Fourth, enacting this tax will cause a tremendous flight of capital out of the US to other countries such as Canada which do not impose such a tax. Those other countries will then have a great opportunity to develop their own capital markets at the probably irreversible expense of the US capital markets. This will also have a weakening effect on the US dollar as Americans and foreigners sell the US dollar in order to purchase foreign currencies to participate in foreign capital markets.

    Fifth, the body of the bill suggests that such a tax would have a negligible impact on the average investor. I beg to differ. For example, a $10,000 trade (or approximately 100 shares of stock in Apple, Inc.) would increase the cost of a round trip transaction by $50. 100 shares is generally considered to be a minimum size for a trade, which would devastate any small business executing even a handful of similar trades each day.

    As you can see, while this bill may sound good on the surface, the effects, if it is passed, will reach anyone who wants to invest their money and will ruin many small business people who are not at fault for this distressing situation all Americans are struggling through.

    Sixth, the passage of this tax will undoubtedly deter Americans and foreigners from investing in US companies by taxing the transaction and making it more costly to do so. Deterring investment in US companies will slow the engine that drives the US economy and will slow job creation. It is the most fundamental and basic economic concept that governments should encourage, not discourage, investment in companies, which in turns drives the economy and creates jobs.

    Seventh, Americans already pay a capital gains tax on any profits which they may be fortunate enough to derive from their securities transactions. It is not necessary, fair or desirable to increase these taxes.

    Last but not least, your colleague Congressman Peter DeFazio has been introducing securities transaction tax bills since the year 2000. So it would seem that he has an agenda for introducing this tax which goes far beyond repayment of the TARP program, even though that is its stated purpose. This fact that Congressman DeFazio has been trying to enact this tax since 2000 also calls into question the stated intention that the tax, if enacted, would be discontinued after repayment of the TARP. This is something that Congressman DeFazio has wanted for a long time, and it seems that he is using the very unfortunate trials and suffering of the American people over the past year as a convenience in furthering his own agenda.

    Overall this tax is a really, really bad idea for the United States of America.

    I urge you to vote NO on H.R. 1068 and all other bills which include the tax.
  9. Yes - email them and express your concern.
    #10     Feb 19, 2009