Before 1966, we had the Securities Turnover Excise Tax (STET). In other words, we used to tax trades a very modest amount. We don't do this anymore. Other nations continue to tax stock trades, and the practice has not ruined them. If we taxed trades in America at a lower rate than other countries do, we would earn enough to pay for the bailout.
Wall Street should be made to pay for Wall Street's malfeasance. The $700 billion should go toward cushioning the blow from the upcoming recession. We're going to need a whole lot of make-work programs.
Thom Hartman discusses this. I'm pissed off at the Air America crowd these days, but a good idea is a good idea.
12 comments:
Seems like a good immediate solution, but wouldn't you have to get rid of capital gains? Why would people want to pay 2 taxes?
Also what about companies that charge you for the trades? Would there be some major changes to how they charge investors?
Just some questions.
People pay multiple taxes all the time. Gas comes to mind. As for the other point -- let the market take care of it.
And let's face it -- nobody wants to pay two taxes. Nobody wants to pay ONE tax. Nevertheless, the money has to come from somewhere.
What are you, a communist?
/snark
This is an excellent idea. I am not sure if it is feasible but this tax could be progressive i.e. at a lower rate for those who only have trades in retirement accounts or worth a certain limit up to billionaires. It could also slow down the turn around on stocks and encourage long term investment to help stabilize markets. Tax stock gifts, swaps, and non publicly held stocks also. Tax it all so no one could bellyache.
Taxes are penalties, like punishment, for handling the filthy lucre. It's not your money, Jack. The Fed pimps out its minted money and charges you for every abuse of its pristine product, every wrinkle and smudge comes at a price. Look at your wrinkled and wilted money. You owe for it, whoever you got it from owed on it, and so on, like Calvinist Puritanism, like secular indulgences. This is not taxation, it's taxism. And yet the Interstate Highway System, if not a miracle, is one of the Wonders of the World.
Abbey
I have not listened to Thomm Hartman (nor Air America)since he claimed that Hillary darkened Obama's skin color in one of her campaugn ads. I even sent him a 6 page letter with proof that Hillary did this. I told him he owed Hillary an on air apology. She never got iy.
I tried (becasue he is very knowledgable) but I just can't read him. Based on the comments here, it is a good idea. But Congress is not going that way. So I won't read it.
bert in Ohio
Whatever happened to just letting these Wall Street guys jump out of their windows? Those were the days.
Well it would end speculation and reduce liquidity in the market. The tax would end up being paid by the investors and not the securities firms. The other countries you mentioned don't have such deep equity markets. Of course you may not care. I suspect something like this will happen, cos people are so mad, but that doesn't mean its a good idea.
There is a cost with any tax. Someone ends up paying it. However with this the first effect would be to lower the value of all shares, by the discounted value of all the expected taxes to infinite. So you would have an immediate stock market "crash" once you announce the change or even the possibility of the change. Not a good idea right now.
Why not just have more progressive taxes generally. Why not tax the rich a little more?
Harry
Harry: I'd love to tax 'em a LOT more. But the cat is unbellable right now.
You'd get an initial spurt of activity if you phased in the securities tax gradually. The cap, to be reached within a year or two, could be .20 percent, same as Taiwan's. Hasn't killed anyone to pay it.
Historically, when this tax was imposed before, was there a fall in liquidity?
Not that it matters, but from Mars it looks like the oil families and the banking families have been competing against each other for Earth's currencies, and in the US they both snookered real estate.
Nashville, Atlanta, and Charlotte still don't have gasoline. The pipelines and deliveries from the refineries seem to be deliberately slowed. Many stations are closed, you wait in long lines where stations are open. Like these 'markets' are test cases for when they turn on the turbo fans? Charlotte is HQ for Bank of America and Wachovia.
Dimitri
I suppose what has happened in the past is that they make market-makers exempt from the tax - which is precisely what you don't want. But yes, Taiwan is somewhat less liquid than other comparable markets. Thats not just the withholding tax, there is also an issue regarding offshore and onshore money. Generally, these transaction taxes have been rolled back across the world in the last 20 years, so we have the reverse example, and yes as these taxes have been repealed, markets have become more liquid. But overall its hard to say.
Its worth noting that in this case (the current crisis) the problem hasn't been equity markets but fixed income (mortgage) markets, where margins are much smaller and volumes much bigger. In the case of fixed income markets 20bps would be an enormous tax. But one could always change the scale. There are very few places which tax fixed income (bond) transactions.
Really what you are suggesting is a tax on speculation, which I'm reflexively against cos I'm a speculator. But being fair about it, well its certainly not unprecedented, but it should reduce stock prices. Personally, I think speculation is a good thing. Helps with price discovery. And besides, the truth will set you free wont it? I prefer the idea of taxing actual income or profit rather than transactions per se. Just cos you trade doesn't mean you made money. But I can see right now that most people are against speculation. They think it intuitively a bad thing. Me personally, I prefer other direct wealth taxes. I hate the idea that unearned income should accrue tax free to those who merely inherit wealth.As a general rule why tax activities? Unless you think the activity is unwelcome?
Harry
PS I hope you are better, and its not just the morphine. I have had some painful and embarrassing surgery myself recently and am currently convalescing at home. If it didn't hurt so much I would be really bored.
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