Transaction tax a serial job killer
Congressman Steve Kagen (D-WI8) will not be happy until he can have his stock transaction tax, regardless of whatever reason he gives for it this week. At the MacIver Institute today:
Congressman Steve Kagen is bringing back the Stock Transaction Tax idea. The tax would be a .25% tax on every stock market transaction over $100,000. It doesn’t sound like much. However, when it finally comes time to dump that stock that was once worth $150,000 that is now worth only $100,000, the investor will get to pay an extra $250 for the privilege. Stick the retirement money back into something else a little later to keep grandma in warm socks for the winter and you get to pay another $250. The same transaction typically costs you only $10 each way through a discount broker.
Remember, too, it’s just like paying the vigorish to your bookie. You owe the tax whether you win or lose on your wager. The difference is that your bookie only sends Paulie Walnuts to collect; Kagen sends the IRS.
According to Kagen, the tax would be refunded for tax-favored retirement accounts, mutual funds, education savings accounts, and health savings accounts. However, that means the taxes would be paid up front and then they would have to be recovered later. That means investment firms would have an extra accounting burden, causing higher fees charged to investors in those accounts. With a higher cost, investors would actually consider riskier investments in order to get the same return.
At one time the tax was proposed as part of a plan to shore up Social Security. Kagen later attempted to make it part of the funding for health care. Now Kagen and others have revived the idea to make the tax supposedly pay for deficit reduction (i.e. more government spending) and a “Job Creation Reserve.” Given the shifting reasons already, the tax’s supporters are more enamored of the tax than they are of any reason for its implementation.
Like most tax and fee proposals, it’s just about getting more of what you have.