
Bill Proposes Making Wall Street Pay - howard941
http://cepr.net/blogs/cepr-blog/senator-sanders-and-representative-lee-propose-to-make-wall-street-pay
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clay_the_ripper
I am generally a pretty left leaning person on social & financial issues. But
I have to wonder on a kind of larger scale, do these democrats who want to
raise taxes really make sense?

I get that it would be nice if we all lived in a more equal and egalitarian
society. It would be nice if we had social safety nets and better health care
and all the rest of it. It would be nice to live in a country where we take
care of our sick, and old and homeless.

But in the cold light of day, does anyone really believe that this tax, or any
tax or any amount of money whatsoever, is really going to change fundamentally
anything about the United States? It would be nice to think so. But as a
pragamatist, I sometimes wonder if it might be time to simply accept the fact
that the United States is a cut throat, profit seeking, pro-business, anti-
safety net kind of country. I mean, honestly, are there really going to be
fewer homeless people on the street after this tax? Is healthcare going to
work again? Probably not.

I’m happy to pay taxes when I believe that the money will make a difference
and actually improve someone’s life. But in a country that insists on spending
untold billions on “defense” honestly, wouldn’t it be better for us all to
keep more of our hard earned money? I wish I didn’t see this so cyclically,
but I just don’t see the US changing very much, no matter who’s president and
how much taxes they raise.

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abduhl
This analysis doesn't even make sense.

"The actual financial transaction tax burden to this 401(k) holder will be
considerably less than this $100 for two reasons. First, not all of the tax
will be passed on to investors. The industry will have to bear part of the
burden in lower fees."

Why is this assumed to be true? Fees on managed funds are quite opaque to
begin with, most people with a 401k have no idea what funds they have let
alone what fees they charge. The market is also not one where buyers (i.e. -
holders of 401ks) are free to choose from sellers generally. Most 401ks are
not self directed, they have certain authorized funds. Therefore, there is
likely not sufficient mobility for competition amongst fees to take place.

This entire part of the article is incomprehensible to me:

"In this case, the cost of the tax to this 401(k) holder would be entirely
offset by the savings from trading less. Let’s say that it cost this person
0.5 percent a trade before the tax is imposed. In that case, the tax will have
doubled their trading cost. The expected result is a 50 percent reduction in
trading volume. Instead of trading $20,000 of stock a year, they will only
trade $10,000. The savings from reduced trading are equal to, or quite
possibly larger than, the tax paid by this 401(k) holder. Before the tax is
put into effect, the holder is paying $100 in trading costs on $20,000 in
trades each year. After the tax is in place the holder is paying $100
(including the tax) on $10,000 in trades. The holder is now paying more for
each trade, with the 0.5 percent tax added in, but is paying no more in total
for trades each year. The financial industry effectively eats the full cost of
the tax."

This assumes that the previous statement is true that fees are reduced to
cover the taxes. In addition, the idea that there will be "savings" from
introducing this new tax is ridiculous. This is the type of thinking that
causes people to spend $50 more buying things online in order to get $15 off.
You aren't "saving" money by spending more!

"Every trade has a winner and a loser, a buyer that paid too much for a stock,
or a seller got too little."

What? Nobody is a winner or loser in a stock transaction. There is just a
buyer who wants in at a given price and a seller who wants out at a given
price.

The fact that the impact on liquidity is hand waved away in the final 3
paragraphs by just saying "these guys are rich anyways" is ridiculous. A
decrease in liquidity due to HFTs being taxed will undoubtedly hurt consumers
with increased bid-ask spreads which, ironically, will result in the maligned
HFTs being able to scalp even more profit.

