WSJ today: Democrats Weigh Tax on Financial Transactions

Quote from OldTrader:

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Finally, spreads should widen significantly costing long term investors even more money than just the transaction tax, and increasing volatility. And IPOs have to be priced lower, increasing the cost of capital to new ventures, in order to attract investors facing higher transaction costs and lower liquidity.

Make no mistake, the transaction tax will be the ultimate in stupidity. Yet don't think it can't happen...look at what has already happened.

OldTrader
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The cost of the tax is small in comparison to what spreads and other costs will be.

Proponents of the tax like economist Baker say the trans tax will take financial sector activity back to where it was in the mid 1980's. I bet worse than that.

About one month ago I searched for data on what spreads were like in the 1980's.

One researcher found that the mean market spread was $0.53 in 1986.

Not only would that reduce trading to only a few times per year, long-term investors would have their lifetime returns reduced by a quarter or one half because of severely reduced compounding.
 
Quote from jprad:

Like the borrow and spend crowd is better?
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"Borrow and spend", "tax and spend"... two sides of the same coin. Only difference is when the impact is felt as the piper gets paid.
 
http://www.pbs.org/moyers/journal/10092009/watch.html


Yeah ????

From another poster....very valid....

paperboy....good post....

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Note ex head IMF economist items...

http://baselinescenario.com/

Yeah....it's really happening.....

Again....GS will win....again...

It will be about whatever GS wants....

Watch it happen....

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1980's gaming was a lot worse than 2009 gaming.....
regarding true transaction costs.....

Stock is never going to be taken down....without making
money in some form in mind....

One will never see give aways in this business....not ever....
 
This would be terrible for volume if it happened. It would be even worse if it were coordinated across the exchanges worldwide. However, I can't see that actually being achieved efficiently.

On the otherhand, money will create loopholes and further opportunites.

What timeframe do posters forsee if America were to implement a transaction tax?
 
Quote from OldTrader:

You're on the right track, but you're too low. The lowest proposal that i have seen so far is .1%. This is the one they have discussed on CNBC. The highest I have seen is .25%.

So at .1% on $53,500, we're talking about $53.50 to buy, and $53.50 to sell. In other words, to make a complete trade would be $107.00. That's 2 points. Now assume you make let's say 3 of those trades per day. That's $321.00 per day. In other words, you gotta make 6 points to break even, BEFORE commission.

If the rate were .25%, we're talking $267.50 per round turn trade. Make 3 of those per day and you're looking at $802.50. How many guys here are making 16 handles a day on one contract?

Effectively, any of these taxes ends the trading business. Period. With that, brokers like IB for instance are going to either go out of business, or have to significantly raise commissions on the long term investors remaining. Expect volume to plummet. Expect software companies to go broke. Etc Etc.

Finally, spreads should widen significantly costing long term investors even more money than just the transaction tax, and increasing volatility. And IPOs have to be priced lower, increasing the cost of capital to new ventures, in order to attract investors facing higher transaction costs and lower liquidity.

Make no mistake, the transaction tax will be the ultimate in stupidity. Yet don't think it can't happen...look at what has already happened.

OldTrader
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At least the useful idiots who voted for Obama will get what they deserve.

Welcome to Socialism and change you can believe in.
 
Quote from Random.Capital:

Why would this be a bad thing? Daytrading provides zero meaningful economic activity - who cares if it dies?
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It provides liquidity. Without liquidity you will have bigger spreads. With bigger spreads, all investors will be hurt.

Why not learn from Sweden's experience? They tried this and they saw most of their volume move to foreign countries. Why wouldn't the same thing happen here?
 
It seems like there are two ways the IRS could collect this tax -- either via individual tax returns or by making brokers pay the tax, who would then pass it along to customers. If the latter, couldn't someone in the US just use a broker in another country not subject to the tax? If the former, obviously there's no way around it.

In all of the articles written about this I haven't seen any discussion about the logistics of collecting this tax. Has anyone read anything about that or know the way other countries collected this tax?
 
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