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Financial Transaction Tax

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Financial Transaction Tax

Postby hobbyguy » Jan 24th, 2013, 11:45 pm

This is an interesting concept:

http://www.guardian.co.uk/business/2013/jan/22/eu-approves-financial-transaction-tax-eurozone

My understanding is that every time you buy shares you pay a small tax fee. Not a big deal for a small investor like me, as I tend to buy and hold for a period. The HFT (high frequency traders) guys and hedge funds must be kicking up a huge fuss though. From my perspective, if this action pushes out these HFT and hedge guys - so much the better as then the markets will make more sense again, rather than being something manipulated by computer algorithims for infintessimal profits taken every .2 of a second.
We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both. - Louis D. Brandeis
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Re: Financial Transaction Tax

Postby Captain Awesome » Jan 25th, 2013, 10:05 am

I doubt it will really do anything. Sure, it will create some money for the govt, but that's about it.
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Re: Financial Transaction Tax

Postby SurplusElect » Jan 25th, 2013, 10:38 am

http://en.wikipedia.org/wiki/Tobin_tax

n 1971 the late Nobel laureate James Tobin proposed enacting an infinitesimal tax on all cross-border currency trades. Though it could be as small as one-tenth of one percent, the tax would generate enormous sums of money due to the sheer volume of trades. A modern variant on the Tobin tax would levy an equally small tax on all market transactions. For the ordinary purchase of stocks and bonds, the cost would be trivial – with no perceptible effect on buyers or sellers. But for the more complex, highly-leveraged derivative transactions – the very ones that sunk our economy – the cost of the tax would add up quickly, helping to dampen speculative excess and temper the wild flows of global capital. It would break the cannibalistic cycle of derivatives feeding off derivatives and money feeding off money. And before long – trade by trade, dollar by dollar – the tax would steer our global system back on course … hard work and entrepreneurial zeal would become valuable commodities again.


In 1994, Canadian economist Rodney Schmidt noted that in two-thirds of all the outright forward and currency swap transactions, the money moved into another currency for fewer than seven days. In only 1 per cent did the money stay for as long as one year. While the volatile exchange rates caused by all this rapid movement posed problems for national economies, it was the bread and butter of those playing the currency markets. Without constant fluctuations in the currency markets, Schmidt noted, there was little opportunity for profit.

This certainly seemed to suggest the interests of currency traders and the interests of ordinary citizens [in national economies were operating at cross-purposes. Schmidt also noted another interesting aspect of the foreign- exchange market: The dominant players were the private banks, which had huge pools of capital and access to information about currency values. Since much of the market involved moving large sums of money (typically in the tens of millions of dollars) for very short periods of time (often less than a day), banks were perfectly positioned to participate. Among swap transactions, which represented a major chunk of the foreign exchange market, 86 per cent of the transactions were actually between banks.



Not only could the money generated basically eliminate government deficits, but it trains the economy not to value meaningless-produce-nothing economic strategies.

The common man can't sink 34 million into a currency market for 12 hours to make a buck - but that is our economy on the top end.
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Re: Financial Transaction Tax

Postby hobbyguy » Jan 25th, 2013, 11:29 am

So this is an old idea under a new label.

Still makes sense to me.

http://www.nytimes.com/2012/10/02/opinion/putting-the-brakes-on-high-frequency-trading.html?_r=0

The best way to deal with HFT problems is to reduce the profitability, and if it helps with government deficit problems at the same time, I make that a win-win for everyone except the Wall St. sharks. 2 or 3 cents on $100 trade wouldn't make any difference to me, but it would sure slow down these leeches.
We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both. - Louis D. Brandeis
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Re: Financial Transaction Tax

Postby Captain Awesome » Jan 25th, 2013, 12:50 pm

hobbyguy wrote:So this is an old idea under a new label.


Sure thing.

Here in BC we have something called PTT - Property Transfer Tax. You buy a house, and for some reason have to pay the govt a small portion of its cost even though you didn't really realize any gains or made money. And more money you spend, more money you send the govt for no reason. Same approach.
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Re: Financial Transaction Tax

Postby RichardW » Jan 26th, 2013, 6:39 pm

Captain Awesome wrote:Sure thing.

Here in BC we have something called PTT - Property Transfer Tax. You buy a house, and for some reason have to pay the govt a small portion of its cost even though you didn't really realize any gains or made money. And more money you spend, more money you send the govt for no reason. Same approach.


It seems to stop people moving house every 12 hours though.

We've come to assume that house prices increase over time, (whether or not that's true from year to year). So on average, we assume the seller is making a financial gain (albeit one they sink into their next purchase). This is presumably the government's way of tapping into that gain.

That said, I don't particularly like the property transfer tax because the amount any particular person ends up paying throughout their life doesn't necessarily depend on what the house they live in is worth or on their own personal wealth, so much as it does on the number of times that person happens to move house.

However, a very small transfer tax that has a negligible effect on normal financial transactions is somewhat different.
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Re: Financial Transaction Tax

Postby Static » Jan 26th, 2013, 6:46 pm

I agree with the tax.
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Re: Financial Transaction Tax

Postby Captain Awesome » Jan 26th, 2013, 7:04 pm

RichardW wrote:That said, I don't particularly like the property transfer tax because the amount any particular person ends up paying throughout their life doesn't necessarily depend on what the house they live in is worth or on their own personal wealth, so much as it does on the number of times that person happens to move house.


I'm pretty sure it does - if I remember correctly it's certain percentage on first 200,000 and certain percentage on the balance - so if you buy a condo under $200,000 you pay much less than somebody buying a penthouse suite for $1.2M.

But we're going offtopic here....
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Re: Financial Transaction Tax

Postby Static » Mar 7th, 2013, 7:08 pm

hobbyguy wrote:This is an interesting concept:

http://www.guardian.co.uk/business/2013/jan/22/eu-approves-financial-transaction-tax-eurozone

My understanding is that every time you buy shares you pay a small tax fee. Not a big deal for a small investor like me, as I tend to buy and hold for a period. The HFT (high frequency traders) guys and hedge funds must be kicking up a huge fuss though. From my perspective, if this action pushes out these HFT and hedge guys - so much the better as then the markets will make more sense again, rather than being something manipulated by computer algorithims for infintessimal profits taken every .2 of a second.


I totally agree with you. Hedge Funds offer no value to society.
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