Of all the dumb ideas to come out of Washington, the “trading tax” takes the cake.
Many US jobs move overseas every day due to the ever-increasing cost of doing business in America. Think autoworkers, whose unions have gotten them great deals zipping in rivets or inspecting upholstery for $80,000 a year — plus benefits.
Have those contracts really helped their cause? Certainly not. Just look at the global share of US auto production for the past three decades — it’s a fraction of what it once was.
So why would you want to add unnecessary cost to the one US industry that is running well? Under the “trading-tax” plan, the government would place a tax on every share of stock bought and sold.
If you want capital formation, which our country desperately needs, you cannot tax the distribution of it. Bank loans, mortgages and even credit cards are clearly at a standstill, and very difficult and expensive to get.
Unless Washington and its New York representatives want the Big Apple to become the next Detroit, they had best tread lightly.
Finance functions wherever there are data and telephone lines — London, Hong Kong or anywhere. The Beltway needs to incentivize — not penalize — capital formation and distribution, if it wants sustainable, stimulus-free economic growth. Major financial institutions need clarity and bona-fide assurances before they can go out and lend again — even Fed chairman Ben Bernanke said this in his recent testimony.
President Clinton lowered capital gains taxes. If today’s lawmakers were thoughtful, they would modestly tax over-the-counter derivatives to support the new cost of regulating them — but that’s it.
Everyone likes to blame Wall Street — sometimes it pays to look at who’s doing the blaming.
Jonathon Trugman is a New York-based investment manager.