Published on November 14, 2009 By Artysim In Politics

Hey did you hear? It turns out that the recession is over! Nevermind that the real unemployment rate is creeping up on 20%

Never mind that companies and individuals the world over have had to cut their spending to the bone, close their doors, lose their homes, declare bankruptcy, or visit pawn shops to make an extra buck.

Never mind that trillions of dollars of public money has gone into private hands "for the good of the economy" all the while causing governments to make tough decisions between whether or not to keep paying grannie smith her pension or close the public library (who needs books anyway!?! Seriously...)

No, the masters of the universe, the major banks and financial investment firms have cheerily declared that the emergency is over. While millions across the globe face a dark future of either sub-standard work, no work or a lifetime of transient labor (it's called going where the work is, look up the history of coal miners in 19th century America) The banks have had their keesters pulled out of the fire and in their books all is well now.

Now that the predatory, flawed system of casino capitalism has been preserved with YOUR tax dollars, the banks are quite content to sit back, pull in a decent profit and watch from their glass towers while the ants below (that's you and me) languish and fight each other for whatever scraps are left over.

Don't believe me? All the mouthpieces from the ass-hat economists who never saw the fiasco coming to well-paid analysts are saying the same thing; life for corporate America is safe, as for the rest of us, well, we can go pound sand. After we bailed them out, they've turned around and said

"Hey, thanks for the help. We're fine now, so you can fuck off. I hear Wal-mart might be hiring in the next county"

The situation isn't right, nor is it fair, and there's a lot of things I think should be done to these folks that will most assuredly never come to be.

But one thing that can and -should- be done?

Let's tax the hell out of them!

Now don't get your panties in a knot. I'm not talking about taxing "the rich", or about taking money from the well-to-do small business owner who's struggling to break even, or the middle class (which by the way is disapearing rapidly)

No, I want to tax the FINANCIAL economy.

For anyone not familiar, we have two types of economy. The first is the real economy. This is widgets built or services rendered. "Widget" means anything from furniture to cars to food to software. Something tangible. Services rendered is everything from a plumber fixing that leak in your house to the barber who gives you a haircut to the accountant who does your taxes.

The financial economy, however is another matter entirely. This economy was never intended to be it's own little world but started out as a means of supporting and growing the real economy. However, things have gotten flipped around and now the financial economy has largely become parasitic to the real economy -and- exists in a magical world of make believe in which virtual money trades hands, and, magically creates more virtual money.

It's all quite convoluted but to a great extent it's become the world's biggest show of smoke and mirrors to hide the fact that no real work is being done or goods produced to "create" all of this virtual wealth. As a side effect of creating this world of financial make-believe, the real world consequences are quite apparent as ultimately the buck has to stop somewhere and it's turned out to be the real economy. Shenanigans and "exotic" debt models created by the banks purely based on a greed for profit have mucked up things royally back in real world resulting in massive unemployment, bankruptcies and foreclosures galore.

So, back to my solution.

In order to reign in the beast and return the financial economy to it's rightful place as a support mechanism, we should tax financial transactions.

Everytime a share of stock  is bought, we should put a 0.25 % financial transactions tax on it.

This means, if you were to buy 10,000 dollars of stock you would pay 25 dollars at the time of purchase in tax. If, 10 years later you were to sell that same stock for 20,000 dollars, you would have to pay a whole 50 dollars. No big deal right?

Under this system, if you're buying stock with the intent of holding on to it for awhile (as it should be) you've got  nothing to worry about.

If you're a day trader who buys at 1 PM with the intent of selling at 2 PM, this will take a bigger chunk out of your pocket and discourage such practices.

A financial transactions tax doesn't address all the issues but it's a start, and it penalizes the speculators who want to turn a fast buck for no work. Fuck them, they can and should get a job at Wal-mart alongside the recently laid off manufacturing worker!

The best part? This isn't my idea. It's already being done in England and I got the concept from this article:

http://www.guardian.co.uk/commentisfree/cifamerica/2009/nov/09/us-wall-street-financial-transactions-tax

 


Comments (Page 1)
on Nov 14, 2009

I want to tax the FINANCIAL economy

Bye bye REAL economy.

Under this system, if you're buying stock with the intent of holding on to it for awhile (as it should be) you've got  nothing to worry about.

If you're a day trader who buys at 1 PM with the intent of selling at 2 PM, this will take a bigger chunk out of your pocket and discourage such practices.

Such practices should (with some conditions/exceptions) be encouraged, since they mean that the stocks of the companies are going to be more accurately priced.

on Nov 14, 2009

How original...tax and spend. Here's a novel idea for you: Governments shouldn't spend so much and try cutting costs..

Now let's delve into your un-researched "solution". Sounds wonderful, unless you're the little up-start company trying to raise a little capital to expand your business (Oh, that's right liberals hate business), hire more workers, or modernize equipment. Won't some people be happy until there are no businesses left.

Now let's talk about who these mean old stockholders are: Of course there are people like Warren Buffet who own stocks and can easily hide or shelter their wealth. So we'll focus on the people that can't. The 40+ million folks, according to the N.Y. Times, that own 401K (yes these are composed of stocks), average people that might own a few shares, including many of your evil day traders. These are the people that will be hurt the most by your plan. It will either force them out of markets or lower their potential earnings by reducing the amount they can invest.

Perhaps you haven't heard of the capital gains tax. This tax is paid on dividends that one earns over the course of the tax year. Let's say you have 1000 shares and these are worth $10 per share on Jan 1. Though out the year you earn $1000 in dividends, but the stock loses value and is worth $5 per share on Dec. 31. How much taxes do you pay? I'll tell you. Even though your stock is now worth half, $5000, you still pay the 35% capital gains tax rate on the full $1000. What a bonus you're add little tax would be. Please keep that gem of idea north of the border.

on Nov 15, 2009

While what aeortar and Nitro say makes good sense, I would like to make this much more simpler.

Why another tax at all? Does the Govt not already take enough in taxes? Why do we not simply revert back to what taxes where meant for? You know, to pay for that which individual people could not that our cities and towns needed. Why does the Gov't need so much money? Why do we pay for useless projects such as why prostitutes in some other country do what they do or why are we building statues of any kind for what ever reason or why are we considering roads to nowhere? What i want to know is why the solution is always more money when more money is what got us in this dilemma in the first place?

Why does the Govt need more money? Why? They have failed with what they already have, why do they need more?

on Nov 15, 2009

Nitro, are you sure about that?  I'm pretty sure dividends are taxed on a completely different form than capital gains.  Capital gains is for when you sell the stock for more than it's worth.  Dividends are taxed just like interest.

on Nov 15, 2009

aeortar-

Bye bye REAL economy.

Actually, it's the other way around. The real economy is already in shambles while the masters of the universe are toasting each other over a job well done. Time to even the playing field!

Nitro-

Now let's delve into your un-researched "solution". Sounds wonderful, unless you're the little up-start company trying to raise a little capital to expand your business

And how, exactly will this hurt these small start up businesses? Here's the thing- a 0.25 % tax is a miniscule portion of your investment AND is incentive to keep your money in a particular stock for at least a while, as opposed to the ridiculous shenanigans today where people have developed sophisticated software that looks for trends and makes the buy or sell decision on a split-second basis, moving massive sums of money around in the blink of an eye. Without getting into the derivative headache (which should be criminal by the way) we have ultimately created a financial system in which we believe we can create wealth out of thin air by playing the market. The real-world rammifications of this type of magical thinking have been illustrated by the wonderful state of your economy today!

in regards to this;

So we'll focus on the people that can't. The 40+ million folks, according to the N.Y. Times, that own 401K (yes these are composed of stocks), average people that might own a few shares, including many of your evil day traders. These are the people that will be hurt the most by your plan. It will either force them out of markets or lower their potential earnings by reducing the amount they can invest.

Again, how would it force someone out of the market? If I have five thousand dollars to invest in a stock, at the time of purchase I would pay a tax of 12 dollars and 50 cents, hardly "forcing" me out of the market.

Who this would affect, of course, is anyone moving massive sums of money multiple times in a single day, and this type of activity is done primarily by the sharks employed by the big financial firms as well as major corporations or ultra-rich individuals. For example, an investment of 100 million dollars would be a tax of 250,000. This would be major incentive to leave that 100 million where you invested it as opposed to "pumping and dumping" or all sorts of other shenanigans.

Remember back when oil was creeping up on 150 dollars a barrel? Or when certain food-stuffs almost doubled or tripled in cost overnight? That was due mostly in part to major investors that had been heavily burned by the derivatives game and wanted to make a quick buck for no actual work on their part- so, they did things like buying up all of Brazil's Soy harvest in one fell swoop or poured money into oil and other commodity stocks like it was no one's business, then of course got out while the gettin' was good.

You might think that this would be a sound financial tool, but what was the real-world impacts of this? During the time when all of these commodities were getting "pumped", there were food riots around the globe, from Asia to Africa to the Middleast, not to mention major protests in most of the industrialized countries. While magical wealth creation is going on in the stock market, people starve in the real world.

How original...tax and spend. Here's a novel idea for you: Governments shouldn't spend so much and try cutting costs..

Hey, I agree with you. But then again, my country doesn't have a 3 trillion dollar VISA bill from invading Iraq -or- have to shell out close to a trillion dollars a year in defence and related costs for maintaning a global network of 700 bases outside of it's borders (Yes, I know the official defense budget was 600 billion but when you throw in all the other costs that are defence related it's creeping mightly close to the 1 trillion mark)

Regardless, this financial transactions tax would provide your country with at least 140 billion per year if not more, the majority of which would be paid by those most able to shoulder the burden- the major corporate investors moving massive sums of money on a daily basis.

Why would they be able to shoulder this burden? Because again, the proof is in the pudding. While the average american citizen aint doing too great financially, what with debt load, stagnating or falling wages and unemployment, most of the major corporate players, including those that got billions of your tax dollars in bailouts, seem to be churning out these 'surprise' profits with increasing regularity

on Nov 15, 2009

Actually, it's the other way around. The real economy is already in shambles while the masters of the universe are toasting each other over a job well done. Time to even the playing field!

I'd have to day this is just silly, Arty.  Careful what you wish for.

on Nov 15, 2009

Jythier
Nitro, are you sure about that?  I'm pretty sure dividends are taxed on a completely different form than capital gains.  Capital gains is for when you sell the stock for more than it's worth.  Dividends are taxed just like interest.

Jythier you are correct. I had my wires crossed. Capital Gains are taxed when stock is sold. Dividends are taxes like income, according to the owners tax bracket, and may rasie said bracket. Good eye (I get all my info yearly on one form). My basic argument still stands however, that being, one pays on the stocks earnings (dividends). One pays if the stock value goes up and they sell (capital gains, 35%). If the stock goes down, the buyer absorbs the loss whatever that maybe. Additional taxes will make this unattractive to the small investor.

on Nov 15, 2009

And how, exactly will this hurt these small start up businesses? Here's the thing- a 0.25 % tax is a miniscule portion of your investment AND is incentive to keep your money in a particular stock for at least a while, as opposed to the ridiculous shenanigans today where people have developed sophisticated software that looks for trends and makes the buy or sell decision on a split-second basis, moving massive sums of money around in the blink of an eye.

First, not all shares are expensive. Many small companies issue stock @ < $1 per share. Many more investors would pass these up. Since the OP suggested a per transaction tax, it would be more cost effective to buy one share of Microsoft ($29.63) than 29 shares of Mom & Pop, Inc. for $1 per share, a full 1/5th of that share is lost in tax.

Sounds like moving masses of money around aggravates you. That's no reason to put an additional tax on it. If the person makes money they pay their capital gains (which goes to the government). This should be make the "tax the rich" people smile... more successful trades the better for the government coffers. On the other hand, holding a particular stock (unless they pay substantial dividends, some stocks do not pay dividends) might not be a good strategy for the small investor. An additional tax would penalize the investor for extracting themselves from a bad or worsening situation.

Do you really believe there is a "magic" piece of software that will pick winning stocks? I wish. Truth is not beats good research and sound investment strategies. Let the traders trade, and don't worry Uncle gets his cut.

Again, how would it force someone out of the market? If I have five thousand dollars to invest in a stock, at the time of purchase I would pay a tax of 12 dollars and 50 cents, hardly "forcing" me out of the market.

Well if it was only the cost of your added tax, probably not much. But now add brokerage fees, maintenance fees, and other costs (current taxes for example) and now it's adding up. If you want to keep/put small investors out of the markets, no problem right? Remember the small business with the penny stock? Well now it's much harder to find someone to take a risk for a chance on a small or modest profit, eaten up even more with your coming and going tax.

The OP states "Every time a share of stock  is bought, we should put a 0.25 % financial transactions tax on it." which seems to indicate a per share price., But then seems to define it further by a dollar amount. I'll assume he means a tax on the dollar amount. What if the value is less than $100? It will cost the government more money to recover the $.25 than it would earn!

Point is you want to tax, in addition to substantial existing taxes, on buying, holding, and selling stocks. Right now the government wants to cash in when the investor makes some money. You want the government to cash in regardless if the investor makes money. Wrong IMO.

on Nov 15, 2009

Hey, I agree with you. But then again, my country doesn't have a 3 trillion dollar VISA bill from invading Iraq -or- have to shell out close to a trillion dollars a year in defence and related costs for maintaning a global network of 700 bases outside of it's borders (Yes, I know the official defense budget was 600 billion but when you throw in all the other costs that are defence related it's creeping mightly close to the 1 trillion mark)

 Where do you get your figures from? Not even close. Here's a LINK for you so you might sound half-way informed. You do realize 1 Trillion is a 1000 Billion (if such a term exists). Maybe you should look up and see the break down on defense spending, instead of pulling basing costs out of thin air. It's tough when your allies don't step up to the plate and pay full cost for their own defense. Don't worry folks like you and our president want to see US military power castrated, then when the world asks for help we can say no.

The only US program with a Trillion $ (+) price tag is this health care ponzi scheme currently in the works (6 years of benefits, 10 years of taxes, then what) and being force fed to the public by the Democrat Party. Cap and Trade might be the next one. But shaking the loose change out of taxpayers (because they are the investors) pockets will not curb the monster in DC's appetite.

BTW which Canadian Prime Minister was it sent their mother to the US for medical treatment? Come talk to me when any country, including Canada surpasses the US in discovery medical treatment, equipment, and drugs. That may be even more difficult if many of these nations had to pay for their own defense including R&D. I'm with you though cut the freebies for the hanger ons, and we'll see what the parasites can do for us and the world for a change.

on Nov 16, 2009

Bye bye REAL economy.

Actually, it's the other way around.

Remember where the problems with the real economy started though - it was with the financial sector (that is, they suffered problems, and then those fed through to the rest of us).

Also the financial economy does perform a very valuable service of making sure money is invested where it is needed. That is, the good business investments are sorted out from the bad ones, allowing them to flourish more, and thus benefitting the economy as a whole. With stocks+shares it means making sure that they are accurately priced and there is a minimal buy/sell spread to allow the strong companies to do better than the weak ones. The main problem with the financial economy is that it's benefits aren't as obvious or tangible as say a manufacturer, and hence it is simpler/more popular to say manufacturing good, financial sector bad.

 

we have ultimately created a financial system in which we believe we can create wealth out of thin air by playing the market.

No, since for every winner there's a loser with what you described (that is for everyone who buys a share when it's undervalued there's someone who has sold it when it's undervalued), and it's like most businesses out there who look to buy something for less than they intend to sell it.

The impact of your tax is to make prices much more sluggish and less realistic. You might know that a share is overpriced and isn't worth a particular amount, but with such a tax you have to wait for it to be significantly overpriced before it might become worthwhile to sell your shares. That then means that resources are no longer going to the best candidates as much as before, since some shares will be more overpriced and others more underpriced. The trade off of more accurate prices is increased volatility, but it's generally a worthwhile one (especially since there are ways of avoiding such volatility with the right derivative combination).

on Nov 16, 2009

If you're a day trader who buys at 1 PM with the intent of selling at 2 PM, this will take a bigger chunk out of your pocket and discourage such practices.

Aren't most day traders losing money anyway?

 

on Nov 16, 2009

LOL.  When will people learn higher taxes are not the solution to anything?

on Nov 16, 2009

LOL. When will people learn higher taxes are not the solution to anything?

Sounds to me, based on Nitro and aeortar (dam thats such a hard name to remember), that artisym is not well versed in the US economic system. Actually, his argument stems more from a person who is agry that someone else made more money without breaking a sweat.

Short of breaking the law, if I could double or triple my check while do less work, I would not hesitate. These days our entire lifestyle depends on money and to a certain extent we always need more than what we currently get. It's one thing to cheat people out of their money, it's another to legitimately make a huge profit out of some kind of venture, such as buying and selling stocks. This mentality artisym has goes against everything this country stand for. People have the right to make money so long as they do it legally and last I checked there is nothing illegal about turning a profit in 1 hour.

on Nov 16, 2009

How about we quit letting Congress get away with refusing to regulate what they have already been tasked with regulating before giving them more to be incompetent with.

on Nov 16, 2009

Where do you get your figures from? Not even close. Here's a LINK for you so you might sound half-way informed. You do realize 1 Trillion is a 1000 Billion (if such a term exists)

I get my 'figures' from multiple sources. As I already stated earlier, the official DOD budget is only 651 billion (only!), but when RELATED defense expenditures come into play, for 2009 you're spending an absolute minimum of 925 billion dollars on defence, with the possibility of creeping up to 1100 billion. Or more. This information is easily attainable but let's take a little look-see here;

http://en.wikipedia.org/wiki/Military_budget_of_the_United_States#cite_note-CRS_FY2009-0

In regards to your cute website with it's little scrolling counters, those costs are actually indeed valid! That is the cost both Iraq and Afghanistan have incurred -ALREADY-, which is going to hit the 1 trillion mark very soon.

So why did I say 3 trillion?

1) That 1 trillion dollar was not payed for with cold hard cash, it all went to your national debt, aka VISA. As you know anything you put on credit ends up increasing thanks to interest until you start paying it off, which aint gonna happen anytime soon.

2) VA and healthcare costs (long term) remember 35,000 physical casualties, over 100,000 cases of PTSD or other psychological trauma, not too mention the several hundred thousand other servicemembers.

3) Replacement of gear and personnel- This is the longest duration the United States Military has seen combat deployments in it's history. An Army's strength needs to be husbanded, not continuously thrown into the grinder. Pretty much everyone agrees (both civillian consultants and military planners) that U.S forces will need down time of at least a few years to re-organize, replenish, retrain, re-equip, etc after such a long deployment.

4) Civilian contractors. Wha? That's right, thanks to your old' pal Rumsfeld half the stuff that used to be done by folks in uniform is now being done by private 'defence contractors' for double, triple or quadruple the price (mostly given out on no-bid contracts) that would be paid for a fellow in uniform to do it. Heck, there's an armed 450 man battalion employed by a company called Armorgroup North to provide embassy security in Kabul and they don't come cheap!

Anywho, a decent summarization can be found here (written in March of 2008 but little has changed since then)

http://www.washingtonpost.com/wp-dyn/content/article/2008/03/07/AR2008030702846.html

BTW which Canadian Prime Minister was it sent their mother to the US for medical treatment? Come talk to me when any country, including Canada surpasses the US in discovery medical treatment, equipment, and drugs.

Yes, your health system does offer some of the best care in the world. If you're rich. I'm not, and am quite content with the healthcare system here. Statistically speaking I will live longer and suffer from less ailments during said lifespan than an American. I will never, ever have to worry about a hospital bill in the tens of thousands of dollars or having to declare bankruptcy or take out a second mortgage just for medical bills. And I remember earlier you pulled out the demographic card in the argument, well you'll be suprised at how multicultural Canada really is!

Do you really believe there is a "magic" piece of software that will pick winning stocks? I wish. Truth is not beats good research and sound investment strategies.

I never said there was a piece of software that will pick winning stocks. If you go back and read what I actually posted, I said that programs have been developed that look for trends and try to time a buy or sell order at the perceived peak or trough value for maximum impact. This kind of market activity has no concern with whether or not the stock is legit or the company behind it, but rather an attempt to maximize profit by taking advantage of micro-fluctuations that come and go as fast as a matter of seconds.... quite often so fast that in the intermediate time it would take for a human being to analyze and make a decision, the opportunity would already be lost.

it would be more cost effective to buy one share of Microsoft ($29.63) than 29 shares of Mom & Pop, Inc. for $1 per share, a full 1/5th of that share is lost in tax.

Actually, that's not how it would work. Whether an investor purchased one share at 29 dollars value or 29 shares at 1 dollar value, the tax would be 0.25 % of the total sum, meaning the investor would pay the exact same amount whether they bought one share of Microsoft or 29 dollar stocks.  By the way, I don't know how you reached the 1/5th of total share price- 0.25 % on both deals would come out to just over a whole whopping 7 cents out of a 29 dollar investment.

 

 

 

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