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

Cutten · Jan 15, 2009

This probably won't pass, although there is a risk. The exchanges, Wall Street, and Chicago/NYC will be strongly against it, as the finance industry will be dealt a death blow on top of the cascade of bad news it has already suffered. Even if the law passes, then there are other countries which don't have transactions taxes, so you will still be able to earn a living, albeit a less good one because the liquidity and information will be lower.

However, it would be a foolish trader who does not work extremely hard for the next year or two, building up their capital from daytrading profits, and working on their position-trading or investing skills. If this tax does come in, short-term trading in the USA will be finished for decades. Once a law is on the books, it takes a long time to get it off, even if it's dumb. Legislative inertia is very real. For that reason, I'd recommend all US-based traders to agitate, contact representatives, and if you have the money, it could even be a profitable use of capital to hire lobbyists.

How does it feel to live in a quasi-socialist country?

"When I picked up my newspaper yesterday, I thought I woke up in France"

- Senator Jim "Nostradamus" Bunning

N.B. the UK tax is only on shares, not on futures or derivatives.

murray t turtle · Jan 15, 2009

Quote from Robert Weinstein:

http://seekingalpha.com/article/114...reduce-liquidity-on-u-s-markets-terrible-idea

Why is it that people with no understanding of financial markets feel compelled to offer solutions to what they perceive as problems?

This recent New York Times opinion article suggests that a transaction tax to reduce liquidity of US markets would be a good thing. Not so.

As an example, compare three or four stocks that trade between 100,000 to 500,000 shares per day with stocks that trade 5 million shares per day. First, you will notice that the bid and ask spread is much larger and thinner in the lower volume stocks. Second, you will find that when there is a large buy or sell order, the price of the stock moves proportionately further than with the higher volume stocks. Obviously, those in favor of the tax have not realized the magnitude of this indirect transactional cost. Even scarier, the stress of these additional costs to investors could drive their interests to the markets of other countries. New York is already faced with stiff competition from London and other locations that would love to have the markets we now enjoy.

Do we really want more layoffs and higher office vacancies in New York City? How about Chicago?

I am also troubled by the notion that participating in the markets is a nonproductive activity. It's akin to saying that a journalist is engaged in a nonproductive activity or being a soldier is a nonproductive activity. Providing companies with easy and inexpensive access to working capital is, in my mind, extremely productive and crucial to a healthy capitalist economy. The increased cost to those investing in American companies would also be passed to the consumer, yet another negative economic consequence not mentioned in the Times opinion article.

What we need now is an intelligent discussion of how we can increase wealth in this country without taxing business sectors out of existence, especially businesses that lubricate the wheels of wealth building to promote capitalism.

Let us not be so quick to âtax the other guyâ as we all know what goes around comes around in an environment that is seeking to punish someone else.

======================
Good questions, Robert.
Well the NYT may not like this, but many newspapers are losing market share for shallow thinking /writing like that. Investors Business Daily is a welcome change.Like that change.LOL

Actually I am not predicting USA president Barack is going to raise taxes , he may or may not. Usually dont watch CNBC, prefer bloomberrg.com, but during the presidental race, Maria B of CNBC interviewed him.

Maria B of CNBC raised her voice at him ''you are going to increase taxes in a recession?????? she asked incredously.Mr Barack backed down & mumbled somthing about Ronald Reagan, who lowered taxes[flat tax.....]

Anaconda · Jan 15, 2009

Quote from Cutten:

This probably won't pass, although there is a risk. The exchanges, Wall Street, and Chicago/NYC will be strongly against it, as the finance industry will be dealt a death blow on top of the cascade of bad news it has already suffered.

Is it really that hard to understand that Wall Street & even the exchanges would be behind this? I mean really, does your brain short circuit when it is explained to you? Or is it really that hard to accept that the daytraders are not vital to the economy or the markets whatsoever, while being loathed by Wall Street?

Big wall Street B/Ds and Market Makers will have exemptions. If you want to daytrade, you will be forced to go to them and pay higher fees & commissions. Oh, and your order flow will be watched & traded against. Simple as that. Same old trick they have been using for decades.

Anaconda · Jan 15, 2009

Quote from annaland:

No one's exempt - not firms, not specialists. This is a federal tax.

Yeah, just like UK stamp duty. Or the latest short locate rules.

Idiot.

TraDaToR · Jan 15, 2009

Quote from Klamath:

It would be the sickest of all outcomes if Goldman et al. were exempt, using a crisis they created as an excuse to make laws to gain even more of an advantage over the little guy.

Best description of the situation. If all those fuckers which are not even able to selection people who are able to pay back their loans, use THEIR crisis to get their edge back on the financial markets...Seriously I join al qaeda, and then eurex or liffe.

annaland · Jan 15, 2009

Quote from Anaconda:

Yeah, just like UK stamp duty. Or the latest short locate rules.

Idiot.

Actually, you are correct. Some intermediaries may be exempt. However, historically when this tax existed in the US for nearly 70 years, specialists and almost all firms were not exempt. I hear there's a cutting edge paper coming out on this topic that will once and for all end the debate on the effects of the tax. Can't wait to see what it says.

NielsenDK · Jan 15, 2009

Quote from annaland:

Actually, you are correct. Some intermediaries may be exempt. However, historically when this tax existed in the US for nearly 70 years, specialists and almost all firms were not exempt. I hear there's a cutting edge paper coming out on this topic that will once and for all end the debate on the effects of the tax. Can't wait to see what it says.

Where exactly did you hear about this paper?

FightTheFuture · Jan 15, 2009

Quote from stock777:

17,000 views. Thats 10X the ET population, so everyone must have read this thread 10X.

Everyone has read it except you apparently.

Quote from stock777:

Frankly, I'd like to see a 2% tax, drive all the black boxes and you 3 cent scalpers out of the game, and then we can repeal the tax and have some fun again.

The only way for you to make money is to eliminate the competition? What do you do all day? You've had a hard life, I'm sure.

Cutten · Jan 15, 2009

Quote from Landis82:

Done.

January 13, 2009 10:34 am

If you are looking for additional sources of tax revenues, I propose the following:

1. A tax on op-ed articles, say 10 cents a word. Not only would considerable revenue be raised, but this is a "green" initiative as it would cut down on paper usage and methane (from b/s) production.

2. A tax on bribes, say 50% to both the giver and receiver. Since we cannot control bribes, especially here in Illinois, home of the "pay for play" Democratic Party, the people might as well benefit from the process.

3. A tax on political contributions over $250. With the hundreds of billions spent in 2008 election cycle a 10% tax would raise tens of billions to be invested in infrastructure, economic stimulus, or IRS and SEC enforcement mechanisms.

â pete, orland park, illinois

http://community.nytimes.com/articl.../opinion/13herbert.html?permid=220#comment220

Best NYT comment ever

Cutten · Jan 15, 2009

Quote from Anaconda:

Is it really that hard to understand that Wall Street & even the exchanges would be behind this? I mean really, does your brain short circuit when it is explained to you? Or is it really that hard to accept that the daytraders are not vital to the economy or the markets whatsoever, while being loathed by Wall Street?

Big wall Street B/Ds and Market Makers will have exemptions. If you want to daytrade, you will be forced to go to them and pay higher fees & commissions. Oh, and your order flow will be watched & traded against. Simple as that. Same old trick they have been using for decades.

Silence, fool, no one wants bottom-feeding human scum like you around here.