The Stock Transfer Tax: Demonizing the Moneymakers

There’s a shocking piece of news circulating on its way to you via word of mouth, print media, and fiber–optics. And it’s something that may come as a bit of a surprise – even a shock – to the stock traders of the world. The news? That you’re all a bunch of monsters. Greedy. Wicked. And quite possibly demonic. At least that’s what some in this world would like to believe is the truth. And what’s more, they want to tax you for it.

What the World Needs Now… Another Tax

In Washington DC’s undaunted quest to tax the living daylights out of every move made by its faithful constituents and squeeze the last living drop from every penny honestly earned, Congress is in talks now to instate a “securities transaction tax” that will, in effect, skim profits off practically every stock transaction made. It’s called the “Let Wall Street Pay for the Restoration of Main Street Act” (cute, right?) and it proposes to impose a 0.25 percent tax on futures contracts, swaps and credit default swaps. What’s more frightening (and ominous) is that the amount to be taxed on options is as yet unspecified. The result? A drastically reduced opportunity for financial gain for investors, who may find it too costly to invest. And in a game fueled by the desire to turn profit, this could spell unimaginable harm for an industry entirely dependent on the optimism of investors to be able to do so. Investment activity would surely experience a substantial decrease, in particular on the part of investors who would likely be scared away by the prospect of higher cost. No surer way exists to stunt financial growth than that.

New York, New York (Oy Vey)

As if you didn’t already feel ganged up on enough, New York state is also considering reinstating the stock transfer tax. Or, more accurately, to repeal the stock transfer tax rebate that’s been in place since 1979. And although New York state governor David Paterson has expressed his opinion that imposing the stock transfer tax would be a bad idea, he did balk at Wall Street’s decision to circumvent high taxes on cash bonuses by paying them out in stock shares instead. Just to remind you that he’s still sore at you. Just in case, you know, you forgot.

The Rationale

You break, you buy. And in this case if you break, you pay. So goes the rationale that’s laid the blame of the entire financial crisis at the feet of Wall Street. Make no mistake, the great collection coffer has been passed, and it’s headed your direction with a pistol planted firmly in the ribs of every unwilling recipient it encounters along the way as if to say “Open your hearts and your wallets… or else.”

How Does This Affect You as a Trader? Well… Pack Your Stuff

Geographic moves for career purposes are generally associated as strategic leaps forward, and rarely as tenuous steps backward. But with the slew of recent proposals that have been slammed onto the table as a means of fixing the economic crisis (without resorting to government budget cuts—heaven forbid), stock traders and the firms they work for may soon find themselves in the unthinkable position of taking the kind of action historically associated with despots and fugitives: skipping town. If New York repeals the stock transfer tax rebate, you might find yourself working in New Jersey if the NYSE makes good on its threats to head for friendlier pastures (a threat that was first made, and not acted upon, all the way back in 1905 when New York first levied the stock transfer tax). But if Congress passes the securities transaction tax, all bets are off. Unless someone can suggest a new island… preferably someplace warm year-round. Barbados

Stock Exchange, anyone?

Other Damaging Effects of a Repealed New York Stock Transfer Tax Rebate

Even if you forget for a moment the effect a reinstatement of the New York state stock transfer tax would have on employees of the NYSE, there are consequences for the state and its residents that can’t go without mention:

  • Lost income tax revenue. If New York loses the Stock Exchange, it won’t just gain a lot of empty office space—it’ll also lose the huge amount of revenue brought in every April 15 when Wall Street workers file their income tax returns.
  • Lost service jobs. The U.S. Commerce Department asserts that every Wall Street worker supports two full-time service jobs. Take away one NYSE employee, that’s another two laid off workers applying for unemployment benefits.
  • Lost businesses. The New York financial sector supports innumerable ancillary businesses that exist within the surrounding area. A potential stock exchange relocation would bring devastating consequences to small business owners who rely on Wall Streeters to keep them in business.
  • Lost home value. Financial havoc has a way of radiating outward, and will greatly reduce the value of homes within the greater New York City area.

Chasing away the moneymakers is a recipe for disaster that’ll not only negatively influence Wall Street, but will have a devastating impact on the economy that makes Main Street a liveable place to begin with.

Lightspeed Financial Services Group LLC is not affiliated with these third-party market commentators/educators or service providers. Data, information, and material (“content”) are provided for informational and educational purposes only. This content neither is, nor should be construed as an offer, solicitation, or recommendation to buy or sell any securities or contracts. Any investment decisions made by the user through the use of such content is solely based on the users independent analysis taking into consideration your financial circumstances, investment objectives, and risk tolerance. Lightspeed Financial Services Group LLC does not endorse, offer nor recommend any of the services or commentary provided by any of the market commentators/educators or service providers and any information used to execute any trading strategies are solely based on the independent analysis of the user.

You may also be interested in...

Support and Resistance: Technical Analysis Techniques and Advanced Trading Strategies
Read More
The IPOX® Week, April 12th, 2021
Read More
Democracy Is Back in U.S. Stocks
Read More
The 10 Most and Least Popular ETFs in the First Quarter
Read More

Try the demo

Compare Platforms
Check the background of this firm on FINRA's BrokerCheck

Our website uses cookies to improve the performance of our site, to analyze the traffic to our site, and to personalize your experience of the site. You can control cookies through your browser settings. Please find more information on the cookies used on our site in our Privacy Policy. By clicking OK, you agree to allow us to collect information through cookies.