The government is trying to destroy the stock market

Apparently the government is trying to destroy the stock market.  There is a new proposal to tax .25% of all stock, bond and option trades.  The thought process here is to let Wall Street pay for Wall Streets mess.  But that will only fool the uninformed.  The ones that will suffer and you and I.

Keep in mind that the vast majority of retirement funds and private retail investments are held in mutual funds.  If this tax goes into effect, the mutual fund companies will have no other choice but to pass that cost along to you dear friends.  This will reduce your returns and seriously hinder your investment returns.

Or take a day trader for example.  If he uses $10,000 for his small trading account and makes one round trip trade per day, that will be a $250 tax bill per week!  Said another way, he will have to overcome an initial cost of 2.5% of his capital each week in order to make money.  How many traders will stay in business if they have to make 2.5% each week in order to break even?  Not many I can assure you. 

What does that mean to you if you don’t day trade?  It means a reduction in liquidity in the markets and larger spreads between the buy and sell price.  It means the volume of trades declines which means the values of stock declines.  Brokerage firms will likely struggle, some will go out of business.  More unemployement in the finance sector. 

Individual traders didn’t cause the economic crisis.  Big Wall Street executives making overleveraged bets with other people’s money along with stupid regulators and politicians caused the crisis.  And you and I, the taxpayers, are the ones who have funded the bailouts.  Now the government wants to tax you even more in order to shore up the governemnts spending. 

Let’s call this what it really is, ‘government confiscation of another $150B of taxpayer money’. 

Please visit this site to sign the petition to block this tax.

Comments

  1. Thank you for the information.

    Anybody investing through US mutual funds will support the burden of the tax. But what if you daytrade independently with a non-US broker? Would such a tax concern US citizens only or would it be applied to anybody trading on US markets?
    I already feel what your answer will be. Unfortunately…

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