FORM LETTER FOR YOU TO ADMEND/CHANGE AS YOU SEE FIT. WRITE YOUR CONGRESSMAN/WOMAN:
It has come to my attention that Rep. DeFazio has introduced his Transaction Tax bill to the House a few days ago. As a finance professional I beg you to read and think about the following points regarding his bill:
-Many countries have tried a similar tax only to repeal it soon after. They have found dramatic decreases in volume and liquidity, increases in spreads, and therefore increased cost to the investing public.
-Lack of liquidity is a large part of today's problems in today's world markets. The bailout funds are being used to buy the illiquid instruments. The Oct 1987 crash was an example of what happens when the equity markets have no liquidity.
-A 0.25% tax sounds small, but to the professionals that provide liquidity it is enormous. Liquidity providers would not only decrease their volume, but many would be out of business the day the bill is enacted. Many would instead do business on international exchanges where there are manageable costs.
-DeFazio expects tax revenues of over $100B per year, but that estimate is based on current volume numbers. In reality the amount collected would be a fraction of that, with a very high cost to investors and the stability of U.S. markets.
Please put a stop to this dangerous bill. DeFazio has been pushing it for years with no regard to consequences or probable outcome.
Don't forget to mention that the TARP already has two sections that deal with repaying the money, so this bill is really just a money grab in my opion.
Public Law 110-343 which was H.R. 1424
SEC. 106. (d) Transfer to Treasury.--Revenues of, and proceeds from the sale of troubled assets purchased under this Act, or from the sale, exercise,
or surrender of warrants or senior debt instruments acquired under
section 113 shall be paid into the general fund of the Treasury for
reduction of the public debt.
SEC. 134. at the expiration of the 5-year period beginning upon the date of the enactment of this Act, if there is a shortfall, the President shall submit a legislative proposal that recoups from the financial industry an amount equal to the shortfall in order to ensure that the Troubled Asset Relief Program does not add to the deficit or national debt.
Here at Trading Educators we try not to venture into politics, unless we are analyzing the possible reactions to political events in terms of economic, investing, and trading opportunities.
However, a New York Congressman has proposed a Bill that is detrimental to active traders/investors such as ourselves. Enough so that we are passing along a website link to you which will allow you to sign a petition against the passage of the Proposal and will automatically submit an e-mail to your Senators and Congressman.
The Bill H.R. 1068 basically imposes a 0.25% transaction t a x on the s a l e and p u r c h a s e of financial instruments such as stocks, options, and futures. While this may sound minimal, it could amount to a round-trip c h a r g e of $50 on a 100 share purchase of AAPL, for example. And that's on every trade you make, in and out.
If you go to this website, you will find more information on the Bill and how to sign the petition against its passage, and
to send e-mails/letters to Congress.