Taxing the Speculators

*Man In Black* · Nov 27, 2009 10:02 AM

Unfortunately, United States officials — especially Timothy Geithner, the Treasury secretary — are dead set against the proposal. Let’s hope they reconsider: a financial transactions tax is an idea whose time has come.

The dispute began back in August, when Adair Turner, Britain’s top financial regulator, called for a tax on financial transactions as a way to discourage “socially useless” activities. Gordon Brown, the British prime minister, picked up on his proposal, which he presented at the Group of 20 meeting of leading economies this month.
...
This would be a bad thing if financial hyperactivity were productive. But after the debacle of the past two years, there’s broad agreement — I’m tempted to say, agreement on the part of almost everyone not on the financial industry’s payroll — with Mr. Turner’s assertion that a lot of what Wall Street and the City do is “socially useless.” And a transactions tax could generate substantial revenue, helping alleviate fears about government deficits. What’s not to like?

Embedded link

Frankly this is a way to make sure that AIG et al pay the taxpayers back for the carnage they have wrought to the world economy.

*tntrn* · Nov 27, 2009, 10:10 AM

I guess my question would be, who gets to determine if what I or anybody else does, is "socially useless" and if they want to go there, perhaps a lot of other activities are socially useless, too. In fact, perhaps everything we do is socially useless. A clear definition of what is or is not socially useful/useless is imperative. Sounds like more psycho-babble to me.

*Man In Black* · Nov 27, 2009, 10:26 AM

What they are speaking to is the short term speculations of the financial markets. (Elsewhere in the article he discusses the use of speculation as a casino system to finance bad practices.)

azhiker96 · Nov 28, 2009, 11:55 AM

I think it's a bad idea.

Such a tax would be a trivial expense for people engaged in foreign trade or long-term investment; but it would be a major disincentive for people trying to make a fast buck (or euro, or yen) by outguessing the markets over the course of a few days or weeks.

If the tax is set high enough to be a significant disincentive for the market guessers, it would not be trivial to everyone else. I like the current system that punishes speculators who guess incorrectly with losses and also hits the successful speculators with income taxes.

Remember, the current recession was not caused by currency speculation but by poor lending practices that the government decided to reward by bailing out the lendors.

*CrufflerJJ* · Nov 28, 2009, 02:08 PM

Originally Posted by Man In Black

(quoted from a link) And a transactions tax could generate substantial revenue, helping alleviate fears about government deficits. What’s not to like?

What's not to like?? How about more government meddling.

What is the value added by the government siphoning off more money from a transaction in which they generated NO value for either member of the transaction?

Let's say I earn my paycheck. I pay federal, state, local taxes (plus plenty of other goodies like Social security & Medicare & whatever else). I take my money & put some into my investment account. I do a transaction to buy 100 shares of "Joe's Bumper Shop, LLC". The govt takes their unearned cut. If Joe's Bumper Shop does well in the market and I decide to sell, I sell my shares. Another transaction tax, PLUS I end up paying capital gains taxes on the increase in market value of the shares.

Let's see...I work, earned money, paid taxes on the money I earned.

Then I pay a transaction tax when I risk MY money on an investment.
Then I pay a transaction tax when I manage to earn some money by selling shares after they climb in price.
Then I pay capital gains taxes on the increase in share value.

Doesn't it seem just a weeee bit silly to get raped by the govt 4 times on the same money?:angryfire

*Man In Black* · Nov 28, 2009, 11:15 PM

The purpose of the Tobin Tax is to prevent churning of the market through short term speculation. (Small investors have essentially zero exposure to the tax as the tax is designed to stop the wholly unhealthy practice of selling a security with the intent of bying it back a day later....)

I had a friend who burned through a 100k a few years ago daytrading. If he had been subject to a transaction tax he very probably would have pursued a buy and hold strategy that may have preserved his equity stake.

The reality is that we are all subject to taxation on each transaction that we engage in whether it is buying a package of gum or a tank of gasoline. despite your belief that government has provided no added value I would simply observe that markets only exist within the framework of laws secured by government. (your property is protected by government.) Capital gains are earned only in the security of a market established within a framework of laws.

You as a small investor would have zero exposure to the tax. if you read the proposal it only targets the short term speculative transaction of a day or less. Your hypothetical investment in Joe would not be taxed on the backend as it is a long term investment......

*tntrn* · Nov 29, 2009, 08:24 AM

[quote=Man In Black;3996122]The purpose of the Tobin Tax is to prevent churning of the market through short term speculation. (Small investors have essentially zero exposure to the tax as the tax is designed to stop the wholly unhealthy practice of selling a security with the intent of bying it back a day later....)

I had a friend who burned through a 100k a few years ago daytrading. If he had been subject to a transaction tax he very probably would have pursued a buy and hold strategy that may have preserved his equity stake.

QUOTE]

So why is it the legislature's right, duty and responsibility to protect, save, deny your friend from doing with HIS money what he wanted to do?

azhiker96 · Nov 29, 2009, 09:45 AM

Act to introduce a world-wide solidarity tax: "The Tobin Tax"

This heading from MIB's link really tells the story. IMO, it's not really about fixing a problem caused by speculators. It's about creating an income source for world-wide projects administered by some un-named organization. It's giving US taxes to an outside entity. Sorry, it's too vague in too many ways.

Billions in revenue would be generated, as much as $300 billion to $1 trillion yearly. Part of the revenue would go to an international fund, another part to national budgets.

*Man In Black* · Nov 29, 2009, 10:15 AM

The link was posted to explain the antispeculative goals of the tax.......

azhiker96 · Nov 29, 2009, 11:24 AM

Originally Posted by Man In Black

The link was posted to explain the antispeculative goals of the tax.......

I'll grant you that. It explains that and more.

Really, I also don't think it would affect serious short term speculators because of the effect of the time value of money. Sure, folks looking to make 1/4 percent overnight wouldn't make the investment but if they could make 1-2 percent it would be well worth the money. However, it would affect long term investors unless they saw huge gains in their investment or if they were somehow exempted from the tax which is and isn't going to happen according to the source provided.

Anyway, it's a good discussion. Lots of thought provoking and exchange of ideas. I reckin we won't get to vote on it anyway.

Taxing the Speculators

Taxing the Speculators

World News & Politics

The end of our democracy

Obama care and nurse pay?

72 hours and counting for HCR vote

Nuns write letter supporting Health Care Reform

Immediate Benefits for Families under Health Care Reform

$2.5 trillion in Social Security bonds stored in filing...

Woman aims to become world's fattest

RIP, Peter Graves

The Cost of Failure to Enact Health Reform

Poor treatment of employees comes back to haunt business

General Articles

Divorcing the Divorce

Please Read After I Am Gone....

Spring Break, a Mothers Perspective

The Magic of Kleenex

Learning What It Means To Be Deaf

Good Ole Boy Medicine

Creating Documents to Promote Patient & Family Guidance: A...

I'm not to old to miss a conspiracy

Watching Fox AND not vaccinating?! Who am I?

Dai Bao's slim fit theory

Tagged Topics