Huge tax on stock market proposed, worst idea ever!

q4u e8 984agn alkj wrote:

Wait a minute. Why blame the government? They are the ones stuck cleaning up whatever mess happens for whatever reason. Companies don't clean up any mess ever they just go out of business.

You can not just blame the government for doing stupid and even corrupt things. Of course they do these things but they are not in it alone.

They haven't cleaned up any mess. They added $1.4 trillion to the national debt, by taking money from us and giving it to corporations that fund their election campaigns. Companies that are doing a poor job are supposed to go out of business. Then the efficient and well run companies can expand into their markets.

Why can't I blame the government? They're the ones making the laws, breaking the laws, and forcing innocent taxpayers to foot the bill.

UsedToBeKnowItAll wrote:

It sounds like a good idea to me. People that are investing in the stock market are adding nothing productive to the economy or our country. Raise taxes on speculators and reduce taxes on earned wages.

You couldn't be more wrong. It further obfuscates price transparency and LIQUIDITY. Speculators provide a valuable function to the economy. That's why instruments like "terror futures" have been bandied about, because they could provide a level of foreseeability otherwise unavailable via a market mechanism. An inane tax like this will merely serve to hurt the little guy who flips a 1000 shares of GS through the course of a year. The Big Boys will simply find conduits to circumvent the tax or ways to offset it.

Big government is self-perpetuating. The more you give people "guarantees" and golden handcuffs based on flawed actuarial assumptions, the more the system takes on a life of its own, and productive capital is sucked out of the economy and into inefficient government programs. Because we are always talking about raising taxes and never about holding government more accountable or efficient, programs like medicare and social security balloon and become insolvent, as they are now, if standard accounting practices were used. How about we cut my mother and father-in-law's California pensions, which allowed them to retire at age 52 and 57, respectively, and are based on massively bloated and flawed assumptions?

These are the same people who fled the state of California with their capital gains and brought their idiotic politics that bankrupted their state to begin with elsewhere, despite continuing to receive their CA checks. One of the reasons Colorado has weathered the economic storm better than most is because of the TABOR amendment, which RESTRICTS latitude with regard to the state's budget. And now, since no one in Colorado is actually from Colorado anymore, we are talking about repealing it. Brilliant!

Do a little research. Look at the sheer number of foreign reserve banks accumulating gold stocks (even countries like little old Mauritania), because they see what's at stake and they know the day of (w)reckoning is coming. Foreign governments no longer have any faith in US sovereign paper (CDS insurance equivalents against default are rising again) and they no longer have an appetite for US Treasuries. All they will do is accumulate on the short-end of the curve, and let existing debt roll over without renewing it. Meanwhile, they have real reserves with which to build their own infrastructure. Our government has just pissed it away and continues to do so at a trajectory unlike any administration before it.

You guys really have no idea.

Mr. Price wrote:

Not like with small business.

How is funding provided to turn a small business into a big business? A major source is an IPO. Without a stock market allowing resale of stock issued in an IPO this source would dry up.

Precisely. And it probably applies more to secondary offerings.

No one said the government has cleaned up any mess. Just that the mess is the corporations. Do you think it is the government's job to clean them up? I think it is the management/directors of the corporations jobs to clean them up. The government is just a small wart on the HUGE corporate mess. Shareholders need to start firing management not giving them raises for fleecing the government rather than building true value.

Ford managed to clean itself up. GM could have but didn't. GM's management needed to say no to the union's years ago... Yet you blame the government because GM keeps taking their money. GM's management just played chicken with the government during an election and won. Companies have now found a business model that is all about taking money from government. They are not going to stop any more than the politicians are going to stop them.

Look at it from a running perspective. The government is the exercise physiologists and the companies are the runners and the coaches. In the 1990's, the runners and coaches started paying too much attention to the physiologists. In the 1980s with Reagan, companies and especially their management started paying too much attention to the government and taxes instead of actually doing something and making better products. Taxes, like running in bad weather, are irrelevant irritants if you are truly doing work that matters.

Sagarin wrote:

Our government has just pissed it away and continues to do so at a trajectory unlike any administration before it.

Whoops. There you go again revealing your true colors. So the "our gov't" that you refer to that is destroying this once great, proud nation (let's take OUR country back!!) is obviously (based on your "unlike any admin before it" comment) referring specifically to the 9 mos of the Obama presidency and Dem controlled congress (the previous 2 years of dem controlled congress had Bush as president the majority was too slim to matter).

Translation: Obama and dems, in 9 mos, are destroying (have destroyed?? The picture you paint on here is usually one of defeat and catastrophe) our nation. I could have read that on any Tea Party blog if I wanted to.

And this statement is made after 10x as long a period of gov't controlled by George W. Bush and the repubs. But you are of course non-partisan, right? If so....

Where were you (and that goes for every righty bitching on here when Bush and the Repubs were....

lying, cherry picking, manipulating, and fear mongering the country's way into a TWO TRILLION DOLLAR (estimate of what it will cost when all is said and done by top economists) war in a wmd-less Iraq that had zero to do with 9/11?? A war that completely interfered with our ability to finish the job in Afghanistan and so has therefore escalated costs there too. Were you feeling too patriotic about "shock and awe" to speak up on here about those trillions of $'s and 1000's of military lives pissed away in the desert?? Maybe you did speak up against that. Just find my those quotes I will shut up about it.

And I know you loved the tax cuts for the rich (is there a tax cut you guys don't like? ) DURING A TIME OF WAR. There goes ANOTHER TWO TRILLION $'s.

And then Bush spent another TRILLION of our $'s on Medicare Part D as mainly a give-away to Big Pharma.

So that is just the tip of the iceberg. But there is FIVE TRILLION $'s spent on a fiasco of a war, a gift to the richest people in this country that didn't need it, and mainly a gift to Big Pharma.

But of course you didn't have much to say back then. But now, after 9 mos of Obama and the Dems? YOU WANT YOUR COUNTRY BACK!!! WAHHHH!!!

(We'd take you a little more seriously if you had spoke up before, and were shouting about impending financial disaster during the Bush/Repub years)

Blowing.Rock Master wrote:

How is funding provided to turn a small business into a big business? A major source is an IPO. Without a stock market allowing resale of stock issued in an IPO this source would dry up.

They could write the tax such that it doesn't apply to IPO's. But when I buy a stock or derivative from some other investor, I add nothing to the company, and don't help it grow. I'm just speculating that the value of that stock will go up.

Sagarin's point about markets being a predictive tool is reasonable. But markets would still exist with this tax and still serve their purpose. We would just be taxing people that add nothing to economic growth.

Personally, the only way I would like to see this passed is if there was an equal, but opposite, across-the-board reduction in taxes on earned wages.

You have a point, but, you add to the transparency of the demand for capital and a company's ability to divine whether or not it should raise capital through a secondary offering or raise debt instead. In fact, supply and demand, even short-term, does determine balance sheet decision making, IRR determinations, and so on and so forth. And, frankly, speculators who short stock are the only natural buyers in a falling market. Why punish them, unless they are nakedly shorting (meaning they didn't even borrow the stock to begin with, which I actually have no problem with reining in)?

Fiscal policy needs to geared toward job creation. Unfortunately, while we've been frittering away for the past two decades, the rest of the world has caught up and even has a competitive fiscal advantage. No free lunch for the good ole US of A anymore. BRM is correct that the unworthy need to fail and capital needs to be allocated productively, lest it be squandered even more (which is precisely what we are doing and why many of us cried about TARP, TALF, stimulus I, II, and III, etc. to begin with) and our political capital and capital capital windows close. Capital is mobile, labor is not. Capital tends to flow where it is least punished.

The coming trend is going to be Americans searching for work overseas as I've said before. At least healthcare is cheap in places like Panama, and there's a cottage industry blooming to facilitate American's care overseas on the cheap, since we have no interest in actual cost restrainment in the states, just universal access.

[quote]UsedToBeKnowItAll wrote:

They could write the tax such that it doesn't apply to IPO's. But when I buy a stock or derivative from some other investor, I add nothing to the company, and don't help it grow. I'm just speculating that the value of that stock will go up.

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Wrong. Derivatives allow investors to hedge positions, and and speculative activity increases liquidity in the markets.

Ask yourself this question: If you invest in company XYZ, you do it expecting a certain return. Would you be willing to invest at the same expected rate of return if you knew the liquidity of the investment was such that exiting was difficult, and your selling would move the price down? Or would you demand a higher rate of return to compensate you for that liquidity risk?

By creating liquid markets, speculators reduce the cost of borrowing (and issuing stock) for corporations. Derivatives do the same thing. If you can hedge a position with options or futures, you will be willing to accept a lower return on that investment.

A better idea is what was called the Tobin Tax. Tax trades where the seller has not held the security for a minimum amount of time (something short, like 24 hrs). This would cut down on the hyper-speculative short-swing trading that serves absolutely no purpose in the market.

8a aorj a8r 8er wrote:

No one said the government has cleaned up any mess. Just that the mess is the corporations. Do you think it is the government's job to clean them up?

Maybe you didn't understand what I wrote so I'll be explicit. It is NOT the government's job to save failing companies. They should fail.

Now explain to me how raising taxes on individual investors fixes anything.

I agree with all the previous posts that have had enough with more new taxes and ever-increasing government spending.

Look what has happened to California: a great state that overspends, is way overtaxed, and is now bankrupt.

No new taxes.

erm wrote:

Wrong. Derivatives allow investors to hedge positions, and and speculative activity increases liquidity in the markets.

Ask yourself this question: If you invest in company XYZ, you do it expecting a certain return. Would you be willing to invest at the same expected rate of return if you knew the liquidity of the investment was such that exiting was difficult, and your selling would move the price down? Or would you demand a higher rate of return to compensate you for that liquidity risk?

By creating liquid markets, speculators reduce the cost of borrowing (and issuing stock) for corporations. Derivatives do the same thing. If you can hedge a position with options or futures, you will be willing to accept a lower return on that investment.

When I buy stock, I'm basically gambling that the value of the stock will go up. I don't expect a specific rate of return and am in no position to demand one. A small tax on my stock trades would have the same effect that transaction fees currently have.

My position is that people that trade should have more of the tax burden pushed on them and people that earn a wage should have less of a tax burden as a result.

Sure, you can list some benefits of a stock exchange, and other financial markets. I'm not recommended we get rid of them. I'm just saying taxing them in the proposed way might not be a bad idea, if it was used to reduce taxes on wages.

UsedToBeKnowItAll wrote:

They could write the tax such that it doesn't apply to IPO's. But when I buy a stock or derivative from some other investor, I add nothing to the company, and don't help it grow. I'm just speculating that the value of that stock will go up.

Without the "speculators", there's no secondary market. If there's no secondary market companies can't sell stock. If they can't sell stock then a very important funding source is lost. Would you buy stock from a company if you knew there was no way to sell it in the future?

Besides, since when are activities taxed according to how much value they add to society? It doesn't benefit society when you go for a run, perhaps that should be taxes too.

Blowing.Rock Master wrote:

Without the "speculators", there's no secondary market. If there's no secondary market companies can't sell stock. If they can't sell stock then a very important funding source is lost. Would you buy stock from a company if you knew there was no way to sell it in the future?

Besides, since when are activities taxed according to how much value they add to society? It doesn't benefit society when you go for a run, perhaps that should be taxes too.

Can you point out where I said there should be no speculators? I said they should be taxed. If this tax went through, or something like it, I would continue to buy and sell stock, just like I do now. It would be the same as if my broker raised his fees.

When have activities been taxed according to how much value they add to society? I'm not sure. There are a ton of sin taxes, on cigarettes for example. People say all the time that if you tax the rich, they will lose incentive to earn more money. So why wouldn't tax policy be targeted towards things that don't add value to society?

[quote]UsedToBeKnowItAll wrote:

When I buy stock, I'm basically gambling that the value of the stock will go up. I don't expect a specific rate of return and am in no position to demand one. A small tax on my stock trades would have the same effect that transaction fees currently have.

My position is that people that trade should have more of the tax burden pushed on them and people that earn a wage should have less of a tax burden as a result.

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While you may not be buying a stock with an expected rate of return in mind, be assured your competitors in the market do have an expected rate of return in mind. Any stock analyst recommending his portfolio manager buy a stock without knowing what his upside is (i.e. when to sell) will get cut off at the knees.

Don't forget that dividends and capital gains are already taxed twice - first at the corporate level, and then when those earnings are distributed as dividends or realized when the stock is sold after appreciation. Companies pay corporate tax at 35%-40% and then the investor pays taxes on capital gains and dividends on the remaining after-tas profit. The tax hit is easily over 50% all in, and only the highest wage earners approach that tax rate.

If you own a gas station, you pay taxes on the business and are not taxed a second time when you use some of the remaining profit to live on.

UsedToBeKnowItAll wrote:My position is that people that trade should have more of the tax burden pushed on them and people that earn a wage should have less of a tax burden as a result.

I realize I made a mistake by stating the proposed tax was a 25% tax instead of a .025% tax......my bad, HUGE difference haha. Good posts by the way, on both sides of the argument.

No fair. You are using actual facts to reach your conclusions.