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Tax on sale/purchase of financial instruments

Democrats push $150B stock tax on Wall Street

A House bill still being drafted aims to raise $150 billion each year to pay for new jobs.

Under a bill being drafted by Democratic Reps. Peter DeFazio (Ore.) and Ed Perlmutter (Colo.), the sale and purchase of financial instruments such as stocks, options, derivatives and futures would face a 0.25 percent tax.

The bill, a copy of which was obtained by The Hill, is titled the Let Wall Street Pay for the Restoration of Main Street Act of 2009.

Half of the $150 billion in tax revenue would go toward reducing the deficit, while the other half would be deposited in a Job Creation Reserve to support new jobs.

The job fund would be available to offset the additional costs of the 2009 highway bill and other legislation that creates jobs.

The Obama administration and congressional Democrats are looking for ways to create jobs after the nations unemployment rate hit 10.2 percent in October and job losses are expected to rise.

House leaders have mentioned the possibility of a tax on stock transactions, but House Speaker Nancy Pelosi (D-Calif.) appeared to raise questions about the approach last week. Pelosi said such a move would need to be done in conjunction with efforts in other countries.

Obviously, we have to work with leadership on this, said Leslie Oliver, spokeswoman for Perlmutter. It has a long way to go, but the idea is to stir debate We think this is one idea that makes a lot of sense.

The stock tax measure specifies that tax revenue would need to support jobs that pay at least the median wage in the United States, promotes manufacturing jobs and prohibits any recipient of the $700 billion financial bailout from directly benefiting from the job reserve fund.

The bill aims to exempt retirement accounts from the impact of the tax.

A group of consumer watchdog organizations and labor unions sent DeFazio a letter this week supporting the tax bill.

Your bill would put Wall Street to work for the public good, by placing a modest securities transaction tax on trades of stocks, options and swaps. A tax on these trades has little impact on the average investor or pension fund because they hold their investments for the long term, but it does disincentivize Wall Street gambling and high-volume short-term speculative trading, the organizations wrote.

The groups include: Americans for Financial Reform, Public Citizen, the Service Employees International Union (SEIU) and the AFL-CIO, among others.

Link to the source


Market Crises= Gray Hair
In other news, the house bill raised $20 million from hedge funds buying Bermudan real estate.

Illinois tried to do this a few years ago and the CME managed to stop it. If the feds do this, the exchanges will be the first to leave and the hedge funds will be the second. At the very least, hiking taxes on profits from financial instruments would do less damage and potentially raise more money.
This is ridiculous, simply because it shoots stat-arb funds right in the foot, considering that the way they make money is through zillions of transactions and making far less than that on each transaction.

In the meantime, the people on Wall Street truly responsible for screwing us over would get away for next to nothing. Let's put this into perspective:

RenTec: uses stat-arb profits to fund non-profit to train better math teachers to give kids a better shot at becoming something in the new economy. Also uses stat-arb profits to fund research for curing autism and generally supporting scientific research.

D.E. Shaw: D.E. Shaw Research (DESRES) is completely funded by the profits from DESCo off of stat-arb and other securities speculation. DESRES uses supercomputing and hires talented scientists in order to find cures for cancer.

Any bill to put a tax on Wall Street needs to target the investment banks and not the hedge funds. The hedge funds weren't responsible for the meltdown. Not even close. In fact, this would be a nice way to end "too big to fail"--impose some form of increasing tax for amount of assets held on books.

So if you're Goldman Sachs or JPMorgan and have a $1 trillion balance sheet, you're going to have to downsize or pay more taxes. But if you're RenTec or Bridgewater or some other smaller privately-owned firm, you get off the hook.

Eugene Krel

Ilya, this may surprise you, but large investment banks have a much stronger lobbying presence than even the biggest hedge funds.

This thing probably won't pass anyway, it's just a bit of sensationalism.
No, it doesn't surprise me. The big banks own the government. I know that already. I just think that taxing philanthropic mathematical heroes is a big no-no.
I agree with you Ilya. Unfortunately, what is most likely to happen is that those with the deepest lobbyist pockets will spin Congress into coming down on the hedge funds. I have already seen some preliminary demonizing on C-Span and read something about a wave of regulation targeting hedge funds.

It's an easy scapegoat and fulfills our societal need to point our fingers and punish someone. John Galbraith must be laughing from his grave.