"Rejected by the GOP?" Give me a break!
Posted on 03/03/2009 9:37:02 PM PST by arkadyka
Liberals are continuing their assault on investors, traders and the stock market. Peter DeFazio introduced the Let Wall Street Pay for Wall Street’s Bailout Act of 2009 bill in another utterly audacious attempt to stifle private enterprise. What is especially sad, the purpose of this bill as officially stated is to pay for TARP! TARP was shoved down our throats by the liberals, largely rejected by the GOP and force fed to the American public.
This bill was introduced several weeks ago, but I am just learning about it now and someone that participates in the market find this to be repulsive and disgusting to the core.
The way it will work, is to simply levy a .25% on every transaction. So let's say for example that you have a 200,000 account and make $1,000,000 worth of transactions, which is as easy as buying and selling several hundred shares of things like BIDU, APPL, IBM, etc. With this tax, you are paying an extra $2,500 win or lose! This is important, you can lose your shirt by making the wrong decisions, pay for the transaction costs and now be forced to pay taxes on top of that!
(Excerpt) Read more at opencongress.org ...
This bill passes, and 2000+ DJ points will come out of the market so fast it won’t be believed.
It will be impossible to measure the damage something like this could cause.
It’s the War on Wealth.
A trader friend of mine, who is well funded and scalps blocks of several thousand shares for a dime or 35 or 50 cents, calculated his taxes on a medium-heavy day of trading. He traded 480,000 shs that day, I don’t know what he made or lost, but probably in the $5K range, certainly less than $10K. His taxes would be $120,000. FOR THAT DAY. Win, lose or draw. If this bill passes, enormous liquidity will be sucked out of the market literally overnight. The carnage will be far beyond anything that has been witnessed so far in this mess.
RECIPE TO KILL THE MARKET:
“The way it will work, is to simply levy a .25% on every transaction.” — on EVERY TRANSACTION!!!!
IOW, you pay tax when you buy and also when you sell.
Traders tend to trade a lot of shares and make a very small percent, they make money, because of the large amounts they are RISKING. They make many transactions a day, buying and selling different stocks all in one day.
E.g. someone buys 10000 shares of a $10.00 per share of stock, so that is $100,000 to buy. He pays $250 in taxes.
Later that day he sells the stock for say 10.20, for 102000.
He pays another $255 in taxes.
His profit would have been $2000, but now he paid $505, in other words, 25% tax on his profits! So he is left with $1,500 (rounded up)
Then he has to pay income tax on it, as regular income on $1500 — 39% federal and some sales income tax, say 10 %, again, rounded up, that’s 50% of the 1500, or $750 NET profit.
So after he made $2,000 profit, by RISKING his own money,
he only gets to keep $750!!!!!, having paid
62% in taxes.
As any traders, if they want to RISK their own money, when they only get to keep 37% of their profit.
CLARIFICATION/CORRECTION:
“His profit would have been $2000, but now he paid $505, in other words, 25% tax on his profits! So he is left with $1,500 (rounded up)”
He paid the 0.25% on the transaction amount TWICE, paying a total of 0.5% on the transactions, which is actually 25% (TWENTY FIVE percent) on his PROFITS.
If you think that’s bad, imagine the futures/commodities market.
Futures trade in incredibly large denominations...a single oil future is something like 100,000 barrels. Treasury futures are $100,000 and $200,000 each; Eurodollar futures are $1 million. Corn and soybeans are comparably large amounts.
Do you have any idea how illiquid these markets would become if one transaction on a single contract cost $2500, and your profit margin was going to be less than that to begin with?
This would destroy futures markets, meaning it would be impossible for farmers, drillers, or manufacturers to do business. There would also be no foreign exchange (except perhaps for government transactions), making travel and international trade virtually impossible.
Its .25 not 25%.
We need to know the value of the 480k shares, but it will probably be a lot - probably a couple of million.
this bill would be the death of liquidity in the market, and presumably of the market itself.
for stocks, this will end program trading as it exists now, and also reduce liquidity hideously. I don’t know if a market-maker or proprietary firm trading exception is even contemplated. Even 1/10th% would be a disaster. Traders across the street would suddenly see their way of life become anywhere from a lot less profitable to a net-loss.
The scary thing is that there are no functional rules anymore on what can or cannot actually be passed, even some moronic legislation like this. There has been a stealth coup and the financial environment is being used as an excuse to do everything the looters have wanted to do for decades.
I watched an interview with the rep who offered this bill, and it was pretty clear he has negative emotional issues related to traders. He apparently has often proposed this kind of madness.
obviously unknown, but if he is trading etf’s (almost the only game in town now for trading that kind of volume consistently), could be 30-40 million easy, which certainly comes close to the 120k estimated new tax the OP noted.
I am baffled at the idea that a 1million proceeds trade (say 14000 SPY today, which isn’t a lot in that etf) will have a 2500$ tax under this proposal, assuming just on sales proceeds (I know this isn’t clear).
So much program, index-arbitrage, etc. trading dies 100% on day 1, and presumably looks at which overseas markets are possible destinations for the capital. Japan’s has a nice lunch break, (if you speak and read japanese fluently)
Typical trade for him = 7K shs SPY. Easy enough, here at SPX700 = $490,000.
.5% (buy + sell) = 2,450.
480K shs (what he claimed, I happen to believe him, I’ve also had him claim to trade 1.3 MM shs during those frantic days in Oct/Nov. That’s a blowout, exhausting day)
480K shs/7000 shs = 68.57. Does he do 60+ trades daily? My sense is he does, most days.
60 trades x 2450 = $147K taxes in one day. He’d be out of business instantly.
Well as a small time trader who just ekes out a salary/living...I’d just like to speak for all of the traders out there by saying...
Go F YOurself you commie bustuds.
Let me alone to pursue my happiness as I see fit.
They broke it, they should buy it!
"Rejected by the GOP?" Give me a break!
Why would I give you a break? Look at how many Republicans voted for it in the house and observe who was the most vocal opponent.
I see what you mean, but there is not much chance of the house stopping crazy bills. In the senate, where they could have stopped it, it was a different story, with most of the GOP voting yes. The author should have explained what he meant.
Incidentally, I asked my pal how many trades he’d done today, about 10:30 CA time, say 4 hours into a six hour trading day.
Did I say I thought he did sixty trades most days?
By 10:30 CA time, 4 hours in, he had done 1219 trades (!!!!!)
Go figure the taxes on that!
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