The Charging Bull Statue stands a few blocks from the New York Stock Exchange before the opening bell at the NYSE on Wall Street in New York City on Friday, January 22, 2021. The New York Stock Exchange recently threatened to flee New York, possibly for Texas, in response to transaction taxes mulled by Albany. Some Wall Street firms could even try to move their operations outside the country to avoid the tax. They say even a 0.1% levy on transactions will cause market players to pass the costs on to consumers and make it harder to buy and sell securities by decreasing liquidity, which measures how easy it is to buy and sell securities. The financial industry is arguing the exact opposite. “The proposed fee is so puny that no reasonable retail investor would ever notice it.” “There is a fee today and the world hasn’t ended,” said Dennis Kelleher, CEO of Better Markets, a group that lobbies for tougher oversight of Wall Street. Due to surging trading volume during the pandemic, the tax rate to fund the SEC is being lowered to just half a cent per $1,000 starting Thursday. Roughly 2 cents per $1,000 traded goes toward funding the budget of the Securities and Exchange Commission. “The concentration of wealth in the stock market is mindboggling,” said Klein, who is now a senior fellow of economic studies at the Brookings Institution.Įven though some argue an FTT would be a disaster, the United States already has a tax, albeit a very tiny one. That makes sense because the wealthiest 10% of US households owned 87% of all stocks and mutual funds, according to 2020 data from the Federal Reserve. White House says stock-trading tax is worth studying after GameStop frenzy (Photo by Spencer Platt/Getty Images) Spencer Platt/Getty Images Shares of the video game retailer GameStop plunged. Markets continue a volatile streak with the Dow Jones Industrial Average rising over 500 points in morning trading following yesterdays losses. NEW YORK, NEW YORK - JANUARY 28: People walk by a GameStop store in Brooklyn on Januin New York City. The top 1% of American households would pay 40% of the total amount of the tax, while the bottom 60% would pay just over 11%, according to the Urban-Brookings Tax Policy Center. A financial transaction tax would be an incredibly efficient and progressive way to raise revenue,” Aaron Klein, a former Treasury Department official in the Obama administration, told CNN Business. “We have tremendous income inequality in our society and a giant deficit. Lawmakers will surely be tempted to tax transactions because it could raise vast sums of money at a time when Washington is strapped for cash.Ī 0.1% tax on stock, bond and derivative transactions could raise $777 billion for the federal government over a decade, according to a 2018 estimate by the nonpartisan Congressional Budget Office. Last week, House Financial Services Chairwoman Maxine Waters said she’s “very interested” and “certainly looking at” a financial transaction tax. “The odds are still against a financial transaction tax being enacted, but for the first time in a decade this proposal should be considered as a viable policy option rather than just another talking point,” said Isaac Boltansky, director of policy research at Compass Point Research & Trading. Wall Street, which would take a hit, is already warning such a levy would backfire on Main Street by raising trading costs and depressing market liquidity. Opponents, on the other hand, paint a financial transaction tax (FTT) as a nightmare. The proposed fee is so puny that no reasonable retail investor would ever notice it.” Progressives see it as a smart way to simultaneously curb predatory trading while funding ambitious programs aimed at easing America’s inequality problem. The leading proposal amounts to a $1 tax on every $1,000 of transactions.īut there is a deep divide over the wisdom of a financial transaction tax. The White House told CNN Business on Sunday that a financial transaction tax on GameStop-like trading deserves additional study and can be part of a greater evaluation of such a tax for revenue and market stability. But there is new momentum for such a levy as the national debt skyrockets during the pandemic and in the wake of the GameStop trading frenzy that shined a bright light on market structure concerns. And some believe Wall Street might just have the answer.įor more than a decade, progressives have tried and failed to impose a financial transaction tax. Uncle Sam is in search for a pot of gold that could ease the pain of trillion-dollar deficits.
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