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National stock transfer tax would raise billions to offset deficits
Ever since mankind organized himself into governments, there’s been a need to pay for the services that governments provide. How to tax and what to tax has been, and will continue to be, a main topic of conversation.
You may remember prior to when our government was being formed, there was a revolt against the “tea tax” that the British government sought to enforce. Yes, it was “Indians” who started that rebellion in the Boston Harbor.
An early incident in this country centered around imposing the federal excise tax on whiskey.
Here in Georgia, recently the Legislature imposed a “bed tax” on hospitals.
Finding ways to tax is always on the table, and always a risky business for the politicians. Therefore, we often get bad taxing methods. Lots of commerce goes untaxed, often with key lobbyists flexing their muscles. It gets you to thinking about the fairness of it all.
Now comes an idea to tax an industry that is not taxed, a system which could raise a lot of money, and yet it would be a tax many people would never feel. That idea is to tax stock market transactions with a small federal levy that could go a long way to getting our country out of its deficit.
Anticipated being proposed by Sen. Tom Harkin of Iowa and Rep. Peter DeFazio of Oregon, both Democrats, is to levy a tax of three basis points (0.03 or three hundredth of a percentage point) on most stock market transactions. That’s three cents on each $100 traded. It would apply to all stock market trades, except not on initial public offerings, nor on bonds, nor initial investments and withdrawals from tax-protected accounts, such as 401k savings. The revenue would be collected at the time of sale by the stock market.
How much would it raise? A whopping $35.2 BILLION a year!
The idea is being floated here, but is also being considered in Europe, where 11 countries are moving forward with similar plans That includes the key countries of Germany and France and in England, where it is called a “Robin Hood tax,” or a Tobin tax, named for James Tobin, an economist who first proposed the idea.
There will be arguments against it, as there are on any new tax. But it moves toward collecting a tax on an industry that generally is not taxed, yet is central to commerce and thrives with hordes of profits. It also can discourage day-traders and others into heavy trading.
As a comparison, buy a new car, and you’re heavily taxed. Spend $20,000 for that car, and the sales tax is $1,200 (six percent in Gwinnett.) You really pay a minimum of $21,200 for the vehicle (plus your tag fee.) Or go to any retail store, say a clothing store, and spend $400, and you end up paying $424.
But buy $10,000 in stock in the Southern Company, or General Electric, Agco, Rock-Tenn, or any shares in any company, and there is no transaction tax. Under the Harkin-DeFazio plan, your tax on buying $10,000 in stock would be $3. That sounds small. But when you add up the many stock transfers across the nation, it comes to the enormous $35.2 billion a year.
Many, many Americans, that is those not in the stock market, would never pay this tax. It “taxes the rich” in one way of thinking, though not at a very high level.
Keep listening. You should be hearing more about this new thought on taxation, both in this country, and in Europe.
- Editor's note: This story originally published at the GwinnettForum.com.