Economics

Stock Transaction Tax: It's Like Slapping Yourself in the Face

|


Via Drudge comes this news, reported by The Hill newspaper, of a long-awaited (by lefties) stock transaction tax bill. Just about every sentence in the article is infuriating, in that dull way:

No caption necessary

Under a bill being drafted by Democratic Reps. Peter DeFazio (Ore.) and Ed Perlmutter (Colo.), the sale and purchase of financial instruments such as stocks, options, derivatives and futures would face a 0.25 percent tax.

The bill, a copy of which was obtained by The Hill, is titled the "Let Wall Street Pay for the Restoration of Main Street Act of 2009."

Half of the $150 billion in tax revenue would go toward reducing the deficit, while the other half would be deposited in a "Job Creation Reserve" to support new jobs.

The job fund would be available to offset the additional costs of the 2009 highway bill and other legislation that creates jobs. […]

A group of consumer watchdog organizations and labor unions sent DeFazio a letter this week supporting the tax bill.

"Your bill would put Wall Street to work for the public good, by placing a modest securities transaction tax on trades of stocks, options and swaps. A tax on these trades has little impact on the average investor or pension fund because they hold their investments for the long term, but it does disincentivize Wall Street gambling and high-volume short-term speculative trading," the organizations wrote.

Back when I made what passed for a living in part by writing an accurately titled column called The $75 Outrage for the left-wing telephone company Working Assets, I took aim at the stock transaction tax and its leading proponent, the economist Dean Baker. Excerpt:

He was trying to teach me something

Though it pains me to say something so obvious, it is clear there is still a faction on the Left that doesn't understand why we have capital markets: Yes, it helps lucky or shrewd investors earn money (while making many of their brokers rich), but that's only one side of the equation. The other side is, companies get to raise money to finance their operations for such useful endeavors as … hiring people.

It always astonishes me how liberals can complain, again and again, about how such and such community, or company, or sector desperately lacks "capital" or "investment," and then turn around and characterize Wall Street as some kind of bogus scam to make the rich richer and throw people out of work. Whether it's through a day-traded purchase of a brand new dot-com stock, or a 10-year corporate bond in GE, the capital markets allow companies to raise money that would otherwise not be available. It is an inherently democratic phenomenon -- you no longer need to curry favor with the local bank president or government official just to open up a business.

Matt's Google search assignment: "stock transaction tax," "unintended consequences," and "London."