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The Transaction Tax Is Harmful
Submitted by Zero Hedge on 12/07/2009 00:03 -0400
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I though they used 'aye' and 'noe', actually.
I do agree that the way the question is formulated could give ground for confusion.
The positive "yay" is contra the tax. In "I think the tax would do more harm than good"
Why not simply:
Yay I support the tax. Nay I don't.
Too late now I guess, but maybe worth looking into in future polls.
What is this... Florida? :)
If you tax the markets here, the markets will just move elsewhere. All taxes are inherently suspect--particularly where the tax is imposed to change behavior or destroy.
The attitude that trading is "socially irresponsible" and that
trading is nothing but "gambling". Someone or the government dictating what is an acceptable behaviour? How is that not facist. Lets just close down Las Vegas then, or any activity that's considered socially irresponsible.
Successful traders DON'T gamble, just the opposite, the objective is to become like the casino. A proven system, taking every set up that occurs with strict money management.
I don't understand HFT issue enough to comment, all I know I will be out of business. GS I'm sure will come out on top.
Why aren't the big banks screaming bloody murder on this proposal? Jim Cramer is supporting the tax, certainly a shill of wall street. I agree with the comment that if we actually had a constitution or a representative government we wouldn't be having this discussion.
"I don't understand HFT issue enough to comment"
Not understanding HFT well hasn't stopped many people from commenting...
"Not understanding HFT well hasn't stopped many people from commenting..."
In the end I could care less about HFT
I and many thousands of traders and small brokers will be run out of business, that was my point.
I wasn't bagging on you at all - it was a very reasonable statement for you to make. I was commenting on the slew of people on ZH that seem to read a few populist articles on HFT and suddenly think they're experts on the topic.
I too am very concerned about a tax being misused.
From a systems perpective, I'd suggest the best way to break these systems is to introduce a delay or "blind time" in the exchange servers. Of course the exchange would never do that suggesting performance issues, but it would create real problems for systems that are "too highly tuned" and thus force them to be detuned reducing their efficiency.
I used to believe that taxes were a way of redistributing wealth more fairly. No more. We have been shown in the past year which direction money is prioritized in times of crisis, so I am for shutting the government down rather than giving them another cent. No new taxes. Period. Let us sort it out with LESS money, a la California. Ugly? You bet. But better that than fattening these leeches further. We need to start tearing this system down in a controlled manner. Not building it up further.
all taxes with the exception those for common defense are immoral.
Short run good, long run bad. Tax rates always go up.
"Harmful" is only half the question. Who will it harm? - that's more important!
I WANT some people to be harmed.
You're poll is bogus because the proposition is poorly framed. Might as well flush the results down the toilet. For a doofus like me, and several others here, seems like a nay vote is a no tax vote (closer scrutiny reveals it is not). I'm not a playa, so I don't know whether it will do more harm. I do know this, anything proposed by Hoyer, Rangel, De Fazio et al is turd city from the get go and should not be graced with legitimacy by the great and mighty zero.
Just an opinion, I don't agree with debate. But , Get leadership in government that is responsible not weak lambs that we see today .... then simply default on US debt . They must create programs that helps American industry and turn back law were it is prohibiting industry. Rebuilding America must be first before the reality of globalization destroys America , and the mountains of obligations causing a break up of the nation and falls into one camp or another only to be a tool of foreign greed and hate. . There is no other way, America must break free from the welfare world system. America , and even the world at large needs to face reality. A tax is just another attempt to give authority to create more debt only causing more bankruptcy of the west. So obviously it must be No on this irresponsible tax.
i agree.. Default, and see what Chinese can do... How about new debate: Should US default on its debt? Yes or No... I am YES
The tax is an attempt to prop up what should be allowed to fall. I agree with much about this post.
The other bit is relocalization. If we stay global, we will be sucked dry. We have been any way.
We need to RICO act the big boyz, seize ALL their assets, let some new organization that is not the FDIC or Fed or SEC, break them up via anti-trust laws. Those seized broken up assets should then get sold by the government and the profit put into the treasury. It's a hybrid thing that needs to happen, break up and seize, if the ill gotten gains can be proved via due process in a court of law. Then lets see if we are bankrupt or not. If not, maybe we can take a look at the balance sheets of smaller US banks and conduct real stress tests. If some can pass, set em up. If some are on the line, loan them what they need to recover. Those that are too far under, sell em off to the ones who are healthy.
The only downside I see to what I have suggested is that other countries may try to claim the seized assets and want to get paid. Thing is, we could probably make the same kinds of stinks in their countries. Dunno.
First thing is first-- RICO. Seize. Run some kind of conservatorship while they are on trial. If collusion has taken place, that would be the one to go after. Gets the most rats at the same time.
Then break up the monopolies.
Then check our treasury's bank account, if still BK, then just fold and restructure in cooperation with the rest of the world. By having done RICO and the Anti-trust, we can at least know we tried to set it right in house first before defaulting. If not BK, rebuild.
Once at the rebuild stage, shift emphasis on meeting local needs, locally. The treasure would not be used to develop more centralized system, it would be dispersed as a way of paying back the states what was taken from them by the monopolistic corporate system. Hopefully this is where jobs would be created and the economy could heal.
Everyone knows that "taxes" are bad. Boooooo bad taxes. Everyone knows "usury" good. Good usury, yum yum. What's wrong with this picture? If it wasn't for "taxes" where would the bailout fairy come from? Tax the rich, feed the poor, till there are no rich no more.
So, all-out socialism? Hasn't worked too well in the past...
Works pretty well for the financial institutions. So what we have now is "tax the poor, feed the rich, until we have more poor, fewer rich."
As posted by ZH, 47% (the poor) have zero income tax, and a whole lot of welfare programs.
According to the NY Times; "Two out of every three United States corporations paid no federal income taxes from 1998 through 2005" and they receive a whole lot of welfare programs as well.
How is that relevant? It doesn't seem to apply to financial institutions at all - and mostly applies to small and unprofitable corporations. And with every response you get farther away from your original proposal of socialism.
No, I didn't start with Socialism, you inferred it. If I state that "an aristocratic system being inherently corrupt" or "a nation of commerce and manufacturing offering temptations to corruption." If I state "individuals have inalienable rights, that these rights exist with or without government." "That man cannot create, take, or give them away." "That laws can be the tyrant's will, and always so when it violates the rights of the individual." Then you are calling Thomas Jefferson, your country' third president, a socialist, in which case I would be proud to be included. I am saying that if the current corporatist economic system can't look after it's less fortunate while gorging on them, they should be taxed into oblivion. Because every action we "create, take, or give" has a social cost. And while I perceive you as being more fortunate than others, I hope you never have to go to your government with hat in hand to provide for your family.
Your arguments are very random.
And your are rhetorical.
I vote Yea because Marla is Hot.
see #145212
How many of you have ever seen a tax of any kind repealed in your lifetime? Clap can be cured, taxes are forever. They are all presented as innocuous at first. There are other ways to deal with HFT. Don't be fooled by the liberals.
Where have you been ? Just a few years ago, they dropped the long distance phone tax that was meant to pay off the Spanish-American war. /sarc
Robert Green of GreenTraderTax is ardently anti-transaction tax (for the impact it would exert on his own business, among other reasons): while it is anything but an impartial source, his blog has nevertheless been very informative, tracking DeFazio's bill since it's inception through it's various iterations.
http://www.greencompany.com/Association/AssociationFinancialTransTax.shtml
How many of you folks here would have considerable problems with a minor tax on each trade?
I believe it would stop, nay kill, all aspects of high frequency computerized trading, while no other trading would feel it *at all*.
ixnay on the taxay
Progressive agenda:
1. Financial Transaction Tax
2. Carbon Use Tax
3. Health Insurance Tax
4. Afghan War Tax
Raising taxes is progress you can believe in.
It's basic.
The Muther F@$#ckers that caused this problem and continue to game the F@#$ing system every day at the expense of the long term financial health of this country, SHOULD PAY THE PRICE FOR THEIR ACTIONS.
To make ordinary taxpayers PAY for this, stealing money from elderly savers, and the children of this nation and world is UNFORGIVABLE under any standard.
Thank you and good day.
yeh... America need more taxes, more bailouts, more govt, more spending, more healthcare bills, more GS, more welfare, more Obama...
If the market is so much more liquid today then why did the crash of last year look as bad as the crash 1929?
All the liquidity providers did not help preventing the crash.
During good times spreads might be tight but during panic the market apparently did not profit from all that supposed-to-be-there liquidity.
In that sense the liquidity is like an umbrella while the sun is shining. It starts to rain and the umbrella is gone.
Traders like to rationalize their unproductive activity by pointing out they reduce bid/ask spreads via adding liquidity. However, they conveniently neglect to mention that they more than offset this so-called benefit by trading with the trend, adding to the disequilibrium and increasing volatility.
I trade stocks, too, but I don't jerk myself into thinking I'm doing "God's Work."
The market is not supposed to prevent a crash. You are confusing them with the Fed.
The equity, options and futures markets stayed open and people that had to raise cash could do so, unlike in 1987 when the NYSE bit the bag and caused a crash.
Liquidity: the ability to get in and out of a position quickly.
The "liquidity exception" was the John Mack/Paulson (with Cox as the tool)ban on shorting the banks and financial stocks which caused way more harm than good--even for the banks (MS) it was supposed to protect. Stat arb and preferred stock long/ short plays got murdered.
Not so fast.
The fed is not supposed to prevent a stock market crash either (at least according to charter.)
I thought a legitimate short seller takes on the task to cover (buy) during a panic.
Who is supposed to prevent a stock market crash then? The Fed and Regulators clearly caused this one by creating the mortgage bubble via too low rates, taking a big long nap while Trillions in toxic waste were created by highly leveraged investment banks in cahoots with the credit rating agencies, the banks using extreme leverage, off balance sheet financing regulated by no one really and relying on short term roll over finance of the bank
I guess No One is in charge of preventing an economic crash--markets go up and down in reaction to the economy, solvency of banks.
The exchanges have in place triggers where trading stops for a period of time depending on the size of the fall off in the SP 500. Also exchanges need to keep "orderly markets" and to have adequate, big pipes to handle trade surges in a panic. That is it.
Your question on covering a short sale is sort of beside the point--if you cannot short AT ALL you cannnot hedge ie go long and short stocks as a risk aversion trade, you cannot short the stock and go long the preferred to extract the delta value. So strategies that rely in part on shorting to hedge risk portfolio lost massive amounts of money due to the arbitrary ban on short selling. No time to react.
Liquid markets and crash prevention are two different things.
A responsible central bank would prevent a bubble from forming to prevent the crash that will come when the bubble bursts.
Relative tight money, prosecution of fraud, regulation for all, leverage limits and so on.
After all of that was not done and the effect of the Asian Crisis on the US got fixed with the tech bubble, the burst tech bubble got fixed with the credit and real estate bubble. At that point it is a bit late for crash prevention.
Now it is more the question how to clean up the mess after the fox was guarding the hen house.
My argument is still that all the liquidity did not prevent the market from crashing.
I did not defend the Fed or said that banning short sales was the right thing to do.
how could any of you be FOR new taxes or even justify it?
WTF?!?!?! FU DeFazio
peoplealso mention "smart/efficient"government? another WTF? this doesnt exist. blow up the whole fucking thing and start over with part time servants in Congress, no salaries...just as Ben Franklin wanted it
There should be just one tax (on any type of income)- something in 30% range split 35% to the feds, 20% to the state, 20% to your local community & 25% to pay off the debt. It should be equal on each and every source of income however, anything that's transparent can not be created by government. Deficit spending should be banned because governments use the money your children may earn to buy your vote now.
We need creative solution to a problem,and not a conventional one. The problem of the stock market is the failure of the model of conducting what basically is an auction of a paper that have no real pricing because there is no known cost of that paper(beside the paper cost and ink). The auctioneer is also a financeer and a buyer and a seller at the same time. All of that makes it impossible to determine a real value for that paper. The unknown variables that affect the price of that paper are numerous and can't be controlled by the buyer.We are light years from finding a real pricing model for that piece of paper,that will enable buyers to rid themselves from abuse. Let us not kid ourselves;you buy a car to use in personal or business.You buy a house to live in or rent and use the proceeds. But you buy stocks,simply because you hope that another sucker(and hopefully an institutional one)will pay you more for it. Let ma ask all one question;unlike anything else,would you buy stocks if you knew that there will be nobody else who will buy them from you?
Nay!
Reasons:
Notes:
If one is inevitable, tax only profitable trades. That way it's at least not regressive.
I work in the corporate tax department of one of the TARP recipients. I can tell you right now that if this passes new instruments will be developed to circumvent this tax. Just like equity derivatives are used to circumvent US withholding tax due to specific provisions in the income tax regulations, this tax would be similarly avoided through games of definition. Great care would need to be given to how definitions are crafted to be broad enough to avoid such planning.
Also, this tax should not be put forth as a revenue raiser but rather as a provision to address a market behavior - whether its HFT by large firms or proprietary trading by bank holding companies or financial holding companies. The proposal should be crafted this way as doing so would make the proposal much more politically palatable.
For example, the HFT proposal could be a tax collected at year end equal to the product of total volume of equity trades times [x] basis points with an exemption for the first $10 million of volume. This would make collection less onerous. A new information reporting mechanism would exist whereby brokers would need to collect trading volume information but this could leverage existing data capabilities.
The basis point amount could be higher if the taxpayer is a bank holding company or financial holding company as a way to a form of insurance premiums the firm would pay for increasing the possibility it might have to be bailed out one day.
Any fees should be on DTCC dollar volume which currently exceeds $3 Quadrillion per year. DTCC charges $.00006 per 100 shares of stock settled. The brokers charge how many thousands of times that?
The DTCC lends your shares to short sellers for a fee; you suffer the downward pressure of the short sellers. How much do you make for lending your stocks?
A fee of .1% on settled transactions [1/10 of 1% or $1.00 on each $1000 settled or cleared], $1,000 per million, $1,000,000 per billion, $1,000,000,000 per trillion, $1,000,000,000,000 per quadrillion so .1% would be about $3 trillion, .5% would be 15 trillion.
The problem is we cannot trust the government with that kind of money. A .3% tax would generate $9 Trillion per year, and it could be reduced annually to .1% in 10 years. It would eliminate the need for income tax, fund rebuilding infrastructure, provide funding needed to rebuild an industrial base, pay for healthcare, provide funding to get every house in the US off the grid, build real trusts for Social Security and numerous other programs Congress has bled dry.
Account maintenance, transaction fees, interest rates and trading fees would need to be regulated or retail investors would get screwed.
It would in essence fine those responsible for the economic collapse, make high frequency trading expensive, and just might give us an opportunity to develop alternative energy sources and reduce defense spending. (I can wish can’t I?)
Nice work. Heavy wish list. (I'll leave others to check the math.) One observation: When you measure something you change the value of what you are measuring. When you tax something you change the entity that you tax. Tax more, get less. I don't think you can expect a linear tax collection curve when you have created a different atmosphere for trading. I'm sure there are some economic principles, with the accompanying mathematics, but I'm no economist -- obviously. Just my layman's observations.