Should There Be A Trading Tax On Stocks?
September 22, 2009 by Tisa Silver
Filed under Finance
Should a transfer tax be imposed on stock trades?
This question was the subject of a spirited debate on CNBC earlier today when Erin Burnett moderated a discussion between David Min, Associate Director for Financial Markets Policy, Center for American Progress and Mark Calabria, Director of Financial Regulation Studies at The Cato Institute.
Photo by infrogmation, courtesy of flickr
Mr. Min argued the benefits of a trading tax, while Mr. Calabria argued the tax would not solve anything.
Mr. Min proposed that the tax could discourage speculative trading, “better align market incentives with long-term outlook,” and reduce volatility while not cramping liquidity too much.
Mr. Calabria countered Min’s argument by saying that speculation in the housing market was worse than speculation in the stock market and the housing market has taxes.
Aside from the fact that there is no hard evidence to suggest that speculation caused the financial crisis, Mr. Calabria said that a tax would not address other issues such as excessive leverage and “loose monetary policy.”
Not too many details regarding the trading tax idea are available, so it’s a tad early to get a meaningful discussion going. However, there are transfer taxes on other assets, is it too outlandish to propose a similar tax be levied upon financial assets?
New taxes are the last thing this economy needs. The government already has more than enough money to blow. We don’t need any more creative schemes to transfer wealth to the government…. talk about greed, this is governmental greed.
On stock trades? I’m just repeating this to make sure I understand. Trades? Um…I’m so confused. I know you already know this, but I wanna work it out–if you had a gain in your position, you have to sell in order to buy something different, so you have a cap gain tax. If you lost money and sell to buy something else, there is no tax because…well, all that’s left is your initial investment or less–which was paid in after tax dollars. If you buy with cash, you are buying with after tax dollars (I’m assuming this point isn’t being discussed for IRAs)…so…where would the extra tax be? This would result in double, triple, etc. taxation. I’m not really a knee-jerk anti-tax girl….but that is crazy.
Am I missing something Tisa? Is there some tax-free trading with tax-free dollars that I’ve forgotten about? Or do they mean to raise the .02 cent SEC fee (yeah, I know, it’s variable) on trades? Still…no…no good.
Hi Yolander, I totally understand your concern. There are a ton of taxes already! The idea floating around is to charge a tax on every stock transaction like the transfer tax charged on real estate. Regardless of a gain or loss, every stock trade would be taxed. Perhaps the term “transaction fee” may fit more so than “tax,” but the federal government would collect the proceeds so it is a tax.
The AFL-CIO suggested the tax earlier this month as a possible way to discourage speculative trading, after the idea originated in the UK and the tax would be 1/10 of one percent tax on all stock trades.
From what I’ve seen of it, it would obviously generate tax revenue but I don’t think it will curb speculation.
It would be disasterous. Think of a tenth of a cent per share. You trade 200 shares in Apple 5 times in one day. Apple is trades slightly above $200. A 1/10 of a cent = $2.00 X’s 200= $400. And that is $400 when you buy and $400 when you sell so now we are at $800. Do that 5 times and you are at $4000 in trading tax.
Does that make any sense as policy to anyone? Day traders don’t have anywhere near the collective clout to move the market so you are punishing day traders to get at speculators….
You can fight that battle but make sure you don’t kill the wrong enemy.