Your examples of gas, alcohol and tobacco taxes are not equivalent to a Financial Transactions Tax (FTT). Gasoline taxes are lower in Arizona than they are in California, but itâs hardly worth the cost for me to drive to Arizona from California to buy gasoline because there would be a huge transaction cost every time I filled up my tank. But as a trader, I can permanently avoid the FTT simply by moving to a country that doesnât impose the tax â- and there will be many.
Look at what happened in Sweden. After they imposed an FTT in 1984, futures volume fell 98%, options trading fell to zero, and most other marketsâ trading volume fell by at least 50%. A large portion of the Swedish financial industry either left the country or went out of business. People who worked in the industry lost their jobs and total tax collections (both capital gains and related income taxes) fell so dramatically that the tax losses wiped out all the gains from the FTT. The total FTT taxes collected were less than 5% of what the Finance Ministry had projected, and what was touted as a way to raise billions in taxes to support social services ended up being a net loss to the Swedish Treasury. The Swedish FTT was repealed in 1991, and it should be noted that Sweden opposes the current FTT tax proposals.
If an FTT were enacted today in the US, how long do you think it would take for the Chicago Mercantile Exchange to become the âHong Kong Commodities Exchangeâ or the âSingapore Mercantile Exchangeâ? All the major exchanges, investment banks and active traders will move their trading activities to FTT exempt countries. Thousands of Americans will lose their jobs and the only people left paying the tax will be the ordinary man on the street. Not only will he be paying the FTT tax, but heâll also be âtaxedâ again when he pays a higher price for every share due to low volume and increased bid-ask spreads.
As a final note, a 2% annual (once per year) management fee and .25% tax on every transaction are not comparable. As a futures trader, a 0.25% transaction tax would be the equivalent of a 150% annual tax on my profits. I don't know of any country in the world that taxes businesses or individuals at the rate of 150% of profits.
Look at what happened in Sweden. After they imposed an FTT in 1984, futures volume fell 98%, options trading fell to zero, and most other marketsâ trading volume fell by at least 50%. A large portion of the Swedish financial industry either left the country or went out of business. People who worked in the industry lost their jobs and total tax collections (both capital gains and related income taxes) fell so dramatically that the tax losses wiped out all the gains from the FTT. The total FTT taxes collected were less than 5% of what the Finance Ministry had projected, and what was touted as a way to raise billions in taxes to support social services ended up being a net loss to the Swedish Treasury. The Swedish FTT was repealed in 1991, and it should be noted that Sweden opposes the current FTT tax proposals.
If an FTT were enacted today in the US, how long do you think it would take for the Chicago Mercantile Exchange to become the âHong Kong Commodities Exchangeâ or the âSingapore Mercantile Exchangeâ? All the major exchanges, investment banks and active traders will move their trading activities to FTT exempt countries. Thousands of Americans will lose their jobs and the only people left paying the tax will be the ordinary man on the street. Not only will he be paying the FTT tax, but heâll also be âtaxedâ again when he pays a higher price for every share due to low volume and increased bid-ask spreads.
As a final note, a 2% annual (once per year) management fee and .25% tax on every transaction are not comparable. As a futures trader, a 0.25% transaction tax would be the equivalent of a 150% annual tax on my profits. I don't know of any country in the world that taxes businesses or individuals at the rate of 150% of profits.
