1/4% Tax on all stock trades pushed in NY Times today
- Thread starter seasideheights
- Start date
Thanks for your comment. But not sure I follow you. I am focused on Main Street market makers versus Wall Street banks. In Part III, I say a FAT on banks has some merit but FTT does not.
I am not pro-Goldman in general. See Itâs Getting Harder To Defend Goldman Sachs http://blogs.forbes.com/greatspeculations/2011/05/18/its-getting-harder-to-defend-goldman-sachs/
Goldman like any corporation will refuse legislation that removes a large % of its customer base - or in this case traders and funds to feed off..how the hell would the government spin "making wall street pay" if it turns out granny and granddad have to pay but the great white shark of wall street who all know by name get let off?
I would be careful here about positioning yourself as against "nurses" in any form whatsoever. I would not use the word nurses at all. Come up with something else.
I would also be careful about using the word "speculators", as in speculators are good, helpful, etc.
Very simply, the average listener to your interview can be assumed to love nurses and hate speculators. So with the positioning you lay out above, you lose on both cases.
Also, I suggest that you stick to at most 3-4 solid bullet points. IMHO, they are:
1. The emotional desire to penalize Wall Street can be appreciated in light of the recession. But an FTT will hurt main street equally.
2. Looking at a history of similar taxes in other countries, they have not been successful.
3. A tax will kill the very activity you are attempting to tax. Thus, everyone suffers, but you receive little or no return.
4. Any new tax that has such broad-based consequences can easily misfire, putting the economy further in jeopardy. This is an especially bad time to consider such a tax. We are, in fact, a capitalist society, and the flow of capital is critical to our health. Taxing it will be like putting a clamp on the carodtid artery of a sick patient.
Mr. Green,
I think an example with a few details would be helpful.
Sweden tried an FTT in 1984 and then repealed it in 1991. It severely damaged their financial markets and they collected less than 5% of the revenues that had been projected by the Swedish Finance Ministry. The losses in collected capital gains taxes were greater than the FTT taxes collected. In other words, it was a NET LOSS for the Swedish treasury. Sweden has come out strongly against the current proposals for an FTT.
It should also be noted that many countries would not impose the tax. If memory serves, Switzerland, Hong Kong, Singapore, Cypress and Dubai have said at one time or another that they would not impose the FTT and would be happy to have the business. An FTT would result in "offshoring" a major part of the financial industry to new host countries, creating tens of thousand of jobs abroad while killing tens of thousands of jobs in any country that imposes an FTT.
////////////////////////////////////////////////////////////
http://en.wikipedia.org/wiki/Financial_transaction_tax
Swedish tax on equity securities, fixed income securities and financial derivatives (1984 - 1991):
In January, 1984, Sweden introduced a 0.5% tax on the purchase or sale of an equity security. Hence a round trip (purchase and sale) transaction resulted in a 1% tax. In July, 1986, the rate was doubled, and in January, 1989, a considerably lower tax of 0.002% on fixed-income securities was introduced for a security with a maturity of 90 days or less. On a bond with a maturity of five years or more, the tax was 0.003%. Analyst Marion G. Wrobel prepared a paper for Canadian Government in July, 2006, examining the international experience with financial transaction taxes, and paying particular attention to the Swedish experience.
The revenues from taxes were disappointing; for example, revenues from the tax on fixed-income securities were initially expected to amount to 1,500 million Swedish kroner per year. They did not amount to more than 80 million Swedish kroner in any year and the average was closer to 50 million. In addition, as taxable trading volumes fell, so did revenues from capital gains taxes, entirely offsetting revenues from the equity transactions tax that had grown to 4,000 million Swedish kroner by 1988.[31]
On the day that the tax was announced, share prices fell by 2.2%. But there was leakage of information prior to the announcement, which might explain the 5.35% price decline in the 30 days prior to the announcement. When the tax was doubled, prices again fell by another 1%. These declines were in line with the capitalized value of future tax payments resulting from expected trades. It was further felt that the taxes on fixed-income securities only served to increase the cost of government borrowing, providing another argument against the tax.
Even though the tax on fixed-income securities was much lower than that on equities, the impact on market trading was much more dramatic. During the first week of the tax, the volume of bond trading fell by 85%, even though the tax rate on five-year bonds was only 0.003%. The volume of futures trading fell by 98% and the options trading market disappeared. On 15 April 1990, the tax on fixed-income securities was abolished. In January 1991 the rates on the remaining taxes were cut in half and by the end of the year they were abolished completely. Once the taxes were eliminated, trading volumes returned and grew substantially in the 1990s.
////////////////////////////////////////////////////////////
I think an example with a few details would be helpful.
Sweden tried an FTT in 1984 and then repealed it in 1991. It severely damaged their financial markets and they collected less than 5% of the revenues that had been projected by the Swedish Finance Ministry. The losses in collected capital gains taxes were greater than the FTT taxes collected. In other words, it was a NET LOSS for the Swedish treasury. Sweden has come out strongly against the current proposals for an FTT.
It should also be noted that many countries would not impose the tax. If memory serves, Switzerland, Hong Kong, Singapore, Cypress and Dubai have said at one time or another that they would not impose the FTT and would be happy to have the business. An FTT would result in "offshoring" a major part of the financial industry to new host countries, creating tens of thousand of jobs abroad while killing tens of thousands of jobs in any country that imposes an FTT.
////////////////////////////////////////////////////////////
http://en.wikipedia.org/wiki/Financial_transaction_tax
Swedish tax on equity securities, fixed income securities and financial derivatives (1984 - 1991):
In January, 1984, Sweden introduced a 0.5% tax on the purchase or sale of an equity security. Hence a round trip (purchase and sale) transaction resulted in a 1% tax. In July, 1986, the rate was doubled, and in January, 1989, a considerably lower tax of 0.002% on fixed-income securities was introduced for a security with a maturity of 90 days or less. On a bond with a maturity of five years or more, the tax was 0.003%. Analyst Marion G. Wrobel prepared a paper for Canadian Government in July, 2006, examining the international experience with financial transaction taxes, and paying particular attention to the Swedish experience.
The revenues from taxes were disappointing; for example, revenues from the tax on fixed-income securities were initially expected to amount to 1,500 million Swedish kroner per year. They did not amount to more than 80 million Swedish kroner in any year and the average was closer to 50 million. In addition, as taxable trading volumes fell, so did revenues from capital gains taxes, entirely offsetting revenues from the equity transactions tax that had grown to 4,000 million Swedish kroner by 1988.[31]
On the day that the tax was announced, share prices fell by 2.2%. But there was leakage of information prior to the announcement, which might explain the 5.35% price decline in the 30 days prior to the announcement. When the tax was doubled, prices again fell by another 1%. These declines were in line with the capitalized value of future tax payments resulting from expected trades. It was further felt that the taxes on fixed-income securities only served to increase the cost of government borrowing, providing another argument against the tax.
Even though the tax on fixed-income securities was much lower than that on equities, the impact on market trading was much more dramatic. During the first week of the tax, the volume of bond trading fell by 85%, even though the tax rate on five-year bonds was only 0.003%. The volume of futures trading fell by 98% and the options trading market disappeared. On 15 April 1990, the tax on fixed-income securities was abolished. In January 1991 the rates on the remaining taxes were cut in half and by the end of the year they were abolished completely. Once the taxes were eliminated, trading volumes returned and grew substantially in the 1990s.
////////////////////////////////////////////////////////////
YES, thank you. An "unalterable" website/guide containing accurate, readily absorbed FTT information, facts and potentially damaging outcomes which can be easily delivered via link or quote to under-informed political advisers, media writers etc.
Also "the tax WILL" context sounds like it's done and dusted when it still remains highly unlikely.
I prefer to read "the tax WOULD, not WILL".
I think this is one of the best arguments against it.
But in order to be understandable for non-trading "normal" people, it would be very important to show some exact calculations to prove how an FTT would kill the business.
Non-traders do not even know what leverage and margin mean, let alone the meaning of "round trip".
So it is easy for them to assume that a proposed 0.05 % tax on transactions is really tiny, and think that everyone complaining about it is just an antisocial kind of person who does not want to share anything with others. They just cannot imagine how such a tiny percentage could ever be said to "kill" an industry. This is why they think that introducing it globally, or using some other measures like the FTT introducing jurisdiction prohibiting their own residents to trade outside their own countries would be enough to keep those traders and make them pay.
So an easily understandable calculation, demonstrating how the effect of such a "tiny" tax is inevitably disastrous for short time leveraged traders, would be necessary IMO.
It should be easily understandable that not only HFT algos, but also most if not all retail traders immediately have to go out of business.
just as a reminder to everyone... this thread, although currently hosted on a public forum, is just for traders.
Please don't mention this thread to non-traders and don't offer links to it elsewhere.
There's new industry folks I've invited here as well.
Please continue to keep the thread professional. You'd be surprised just who is here & reading your posts.
Thanks.
Please don't mention this thread to non-traders and don't offer links to it elsewhere.
There's new industry folks I've invited here as well.
Please continue to keep the thread professional. You'd be surprised just who is here & reading your posts.
Thanks.
exactly, we had a financial transaction tax from 1914-1966 and America was not a superpower then, we were a poor agrarian society, they got rid of the tax and we then went to the moon, you see how the ftt kept the USA from achieving all that she could, if we bring back a tax we had for decades then we may never do the incredible things America has the potential to do. If they taxed smokes or alcohol or fuel then America would see a huge decline in those items throwing tens of millions out of work, those excise taxes add up to 66 billion pr yr. The ftt would only be plausible if it replaced the death tax which is 18 billion pr yr, this tax hurts the middle class the most since the rich dont pay it, they put there wealth into trust and foundations, what, you think edward kennedy paid death taxes, come on. Look at how ordinary people get clipped purchasing Mutual Funds, .87 for 12b-1 fees, 5% loads n such then of course the management fees running about 1.5%, those hedge funds charge 20 percent of gain and 2% management fees, these industries would be decimated since they already heavily and nickle and dime people due to govt regulations n such. A .25% tax is simply unacceptable. It could send us back to an agrarian society and lose all capabilities of being a space faring nation.