Raw Finance

Securities Industry and Financial Markets Association (SIFMA) President Tim Ryan appeared on CNBC on Friday, Dec. 4, 2009, to discuss proposals in the U.S. House and Senate to apply a tax to financial transactions, such as stock and option trades.  One proposal by Rep. Peter DeFazio, D-Ore., would apply to trades made by U.S. businesses or residents, no matter where they take place.  It would tax futures contracts, swaps and credit default swaps at a rate of 0.02 percent and stock transactions at 0.25 percent. Options would be taxed at the rate of the underlying asset.  The tax would be refunded for mutual funds and savings accounts for retirement, education and healthcare.  It would not apply to the first $100,000 of activity.  However, despite the carve-outs, the cost of complying with the tax would apply to all investors.

The tax proposal has not yet found its way into a bill.  There have been discussions to include it as part of a jobs bill to help pay for whatever job creation mechanisms Washington can dream up.

Ryan’s appearance on CNBC is worth viewing.  Also, below the video is a statement on the proposed transaction tax released by SIFMA.

Please click on the following link to CNBC to watch the video: Who really pays the trader tax?

SIFMA Opposes Securities Transaction Tax
Would Tax Savings for millions of Americans

Washington, DC, November 18, 2009—The Securities Industry and Financial Markets Association (SIFMA) today released a statement from Kenneth E. Bentsen, Jr., executive vice president, public policy and advocacy on a legislative proposal that would impose a tax on securities, futures and derivative transactions.

“Imposing a tax on financial transactions is the wrong idea at the wrong time. Such a tax would likely result in a stalling of the stock market, cutting off companies’ ability to raise capital to fund new investments in plants and equipment, and thus create jobs.

“Furthermore, it would directly and detrimentally affect millions of Americans by imposing a tax on their savings such as mutual funds, just as they are seeing their investment assets regain value. Additionally, the exemptions contained in the proposed legislation are completely unworkable.

“At a time when we are in the beginning stages of economic recovery, imposing a tax that would actually constrict economic expansion is bad policy. The better policy direction to ensure any future financial crisis does not result in an economic downturn is establishing a strong systemic risk regulator and clear, unambiguous resolution authority for failing institutions.”