Financial Transaction Tax: Here Comes a Really Bad Idea

[tortoise]

Unless you’re a die-hard Trumpster (and maybe even if you are), you recognize that a Democratic Party sweep in 2020 is all-but-inevitable. That sweep is going to bring with it big and expensive plans.

It is every progressive’s dream to implement a financial transaction tax to help pay for them. From AOC on up, FTT is always on their must-implement list. I can’t count the number of times I’ve heard it invoked just over the past few days.

Every potential Democratic presidential candidate has voiced support for it.

Bottom line: If you’re a US-taxpaying trader trading, say, the ES on an intraday basis, you probably have three years left to make bank.

Consider yourself warned.

 

[gaussian]

you recognize that a Democratic Party sweep in 2020 is all-but-inevitable. That sweep is going to bring with it big and expensive plans.

This is bullshit. Trump doesn't represent the average GOP voter. Trump is at best a horrible republican and an ok democrat. He won because he was against an absolute trainwreck of a democrat. He didn't win by "representing the party". It's like Curry subbing in the playoffs for the basketball special olympics championships. When you outclass your opponent by existing you didn't really "win".

Trump has given both the GOP and the DNC so much ammunition the only person who will certainly fail to make primaries is Trump. That's assuming he's not found to be a Russian stooge which is looking more likely every single day. The GOP will use his twitter and huge ego to have him erupt on live TV and further destroy his credibility. The DNC can run commercials for YEARS on his psychobabble tweets alone. This doesn't speak volumes about the GOP as a whole who has started to loudly oppose his idiocy.

Every potential Democratic presidential candidate has voiced support for it.

I don't doubt this but can you provide some evidence? This would be good to bring to the always trumpers in a "here's what tariff man has cost us in 2020".

Bottom line: If you’re a US-taxpaying trader trading, say, the ES on an intraday basis, you probably have three years left to make bank.

What do you mean? I really want to get on your side but you provided zero links so until proven otherwise I'm going to go with this is complete bullshit.


Can you provide ANY evidence to corroborate your claims? For my sake?

 

[sle]

The only "invocation" I've heard was linked to Oscario-Cortez who is (while an interesting personality and, tbh, rather cute) more or less irrelevant to actual legislature.

I would say probability of FTT in the US is close to zero. If it did happen, I would also think it would not be the end of the world, except to the HFT community.

 

[Stockolio]

https://www.cnbc.com/2016/07/22/hillary-clintons-financial-transaction-tax-why-it-may-not-work.html

That's fucked up... It'll never happen tho, that Tax and Cortex Vortex the socialist will exterminate US markets, Canadian Markets will benefit greatly tho!

 

[tortoise]

This is bullshit. Trump doesn't represent the average GOP voter. Trump is at best a horrible republican and an ok democrat. He won because he was against an absolute trainwreck of a democrat. He didn't win by "representing the party". It's like Curry subbing in the playoffs for the basketball special olympics championships. When you outclass your opponent by existing you didn't really "win".

Trump has given both the GOP and the DNC so much ammunition the only person who will certainly fail to make primaries is Trump. That's assuming he's not found to be a Russian stooge which is looking more likely every single day. The GOP will use his twitter and huge ego to have him erupt on live TV and further destroy his credibility. The DNC can run commercials for YEARS on his psychobabble tweets alone. This doesn't speak volumes about the GOP as a whole who has started to loudly oppose his idiocy.



I don't doubt this but can you provide some evidence? This would be good to bring to the always trumpers in a "here's what tariff man has cost us in 2020".



What do you mean? I really want to get on your side but you provided zero links so until proven otherwise I'm going to go with this is complete bullshit.


Can you provide ANY evidence to corroborate your claims? For my sake?

I’m not sure what point you’re making about Trump. He’s not going to get reelected. The incumbancy math heavily favors Senate Democrats in 2020. And the House is not going to flip GOP, period.

We will see a Democratic Party sweep unless Dems somehow, miraculously, f%ck it up. Which could always happen, I suppose.

As for the rest, fair enough. Everyone will (and should) decide for him or herself what’s real and what’s bullshit. I follow this stuff very closely, and that world used to be my world, but there’s absolutely no reason to take the say-so of an internet anonymity for any of this.

As for “evidence”...start reading Politico and The Hill closely. Hardly a day goes by without some dingbat on the Ways and Means Committee invoking FTT in the laundry list of revenue-enhancing priorities.

I hope I’m full of shit here. I hope I’m flat silly wrong. Yes, I think this is bearing down like a freight train in the distance.

But maybe I’m deluded. Let’s hope.

In the meantime, I’m going to get ready.

 

[tortoise]

The only "invocation" I've heard was linked to Oscario-Cortez who is (while an interesting personality and, tbh, rather cute) more or less irrelevant to actual legislature.

I would say probability of FTT in the US is close to zero. If it did happen, I would also think it would not be the end of the world, except to the HFT community.

Other members of Congress have said that the super-high marginal tax rate is a non-starter, then mentioned FTT as an alternative. Which I find interesting...protecting their wealthy donor base.

And AOC is not irrelevent, unfortunately. She has two million Twitter followers—more than any other member of Congress—and her colleagues are a bit scared of her as a result. Politics-by-social-media changes everything, in ways we’re just beginning to appreciate.

FTT is a very inefficient way to put the brakes on HFT, btw. It’ll definitely change the way markets function, but how will depend on the details.

A safe assumption is that it will make short-term trading a much less appealing proposition.

 

[sle]

Other members of Congress have said that the super-high marginal tax rate is a non-starter, then mentioned FTT as an alternative. Which I find interesting...protecting their wealthy donor base.

Care to float a reference to anything but AOC's proposal? I don't see anything in the news off if I google it.

Now, what do you mean by "get ready"? More importantly, why do you believe that it would cause a financial armageddon? I would never advocate it, but the countries that introduced these measures did not destroy their financial systems as well as usually found that there are way too many loopholes to avoid it. Even if it's air-tight somehow, 20 years ago transactions costs were multiples of the proposed tax rates yet the market was reasonably liquid.

 

[sle]

And AOC is not irrelevent, unfortunately. She has two million Twitter followers—more than any other member of Congress—and her colleagues are a bit scared of her as a result. Politics-by-social-media changes everything, in ways we’re just beginning to appreciate.

For comparison, Katy Perry has a hundred million. Our Fearless Leader has 50 and he's not even pretty. I'd say she's got a long way to go before she becomes a mover and shaker.

Other members of Congress have said that the super-high marginal tax rate is a non-starter, then mentioned FTT as an alternative. Which I find interesting...protecting their wealthy donor base.

Actually, I think higher (not super-high, but higher) marginal tax rates are almost a given once the reality sinks in (like around 2025). We probably will go back to 50ish percent for the top 1% of earners.

A safe assumption is that it will make short-term trading a much less appealing proposition.

Why is that? If there is enough alpha to beat the transaction costs, it's still a-ok. It's kinda irrelevant where T/Cs come from - exchange clearing fees, taxes or MM vig. People trade intraday in Korea, HK and all the rest of the countries where FTT is imposed and seem to make money.

 

[tortoise]

For comparison, Katy Perry has a hundred million. Our Fearless Leader has 50 and he's not even pretty. I'd say she's got a long way to go before she becomes a mover and shaker.

Katy Perry isn’t a member of Congress. AOC is a noise-maker of a particular sort they haven’t enountered before. Old guard working to put her in her place. They may well succeed, but the wave she represents will not be contained, I don’t think. We’ll see.

People trade intraday in Korea, HK and all the rest of the countries where FTT is imposed and seem to make money.

To the best of my knowledge, there is no FTT in Korea, Hong Kong, or anywhere else in Asia.

 

[sle]

What does “reasonably liquid” mean?

Well, let's see - it would still have enough liquidity to facilitate transfer for capital. By the way, based on some of the metrics (e.g. depth of the book etc) market is actually less liquid now than it was 10 years ago when transaction costs were higher.

On what basis do you conclude that “20 years ago transactions were multiples of the proposed tax rates?” (For that matter, what exactly do you mean by that?)

Proposed tax is 10 basis points (at least that's what I saw on Google), tens of basis points bid/ask spread was perfectly normal back then.

You can Google stuff on FTT debate. It’s a really dumb notion (just ask the Swedes). But my thumbs will fall off it I have to rehash it here.

I am not by any means advocating the idea, but I can say (since I do trade in countries that have FTT) that there are plenty of way to get around it and it will be a marginal nuisance at worst.

To the best of my knowledge, there is no FTT in Korea, Hong Kong, or anywhere else in Asia.

Well, you knowledge is not best then

• HK has a 10bps "stamp duty" (with the standard derivatives and MM exemptions)
• Korea has 15bps (sell only)
• Taiwan has 30bps (sell only)
• Singapore have one too but it's weird and does not really apply.

PS. Taiwan actually has an FTT intraday reduction that recently took effect - can't remember the exact details