Nobody likes new taxes, so I am going to present a revenue enhancement plan that would be used specifically to fund unemployment extensions for our nations 99ers. Yes there is a difference, as unlike taxes that are taken directly from your paycheck, my revenue enhancement plan allows people to decide whether or not they want to knowingly participate. In a capitalistic society the mechanisms for investment to capitalize businesses so they can be poised for growth is an important fundamental. Speculation in the markets just to turn a quick profit is not. In many ways our financial markets, including our stock markets, have been bastardized so badly that they have simply become a format for legalized gambling.
Recognizing this fundamental departure from the primary purpose of the markets to provided capitalization to businesses in support of the production of products that will generate income, dividends, and increased generation of wealth through profit, one can look at the playing field, and the teams participating differently. It is time to separate the true investor from the gambler. True investors should be allowed to participate in the markets unfettered, but the gamblers should be forced to pay their cut to the house just like they would have to at any casino. Gambling isn’t free, and one assumes a higher level of risk that must be born differently by those that are motivated to speculate versus those that are honestly trying to invest. The following proposal reflects this basic principle and puts bearing the cost of this assumed level of risk into a more appropriate perspective:
Anyone “investing” would be exempt from paying this new revenue enhancement levy. This exemption would include anyone participating in the initial public offering (IPO) of a stock and those purchasing acceptable retirement vehicles for their Roth IRA or 401K plans. All others would be required to pay the levy up to and including corporations that participate in the repurchasing of their own stock. Call it tough love, but the levy would not need to be onerous. This plan looks to charge a whooping .1% on every excluded transaction; yes you saw that right there is a decimal point before that 1. Putting this into perspective, this means a levy of 1 cent for every $10 dollars of value of the transaction. The levy would be paid by the purchaser much like a sales tax. There is already a compelling precedence to support a move in this direction, and that is the requirement by many states for people to pay sales taxes on items purchased off of places like eBay. This just needs to be implemented at a national level on investment instruments.
Using Citigroup common stock as an example of how this levy would produce significant revenues to fund unemployment extensions, the average trading volume per day for this stock is 471,072,000 shares or roughly 1.6% of its total market capitalization. Yes, the tail wags the dog in determining the total value of outstanding shares in the market, and this is speculation at its finest. The buy and hold investor is being held hostage by the day trader, but that is an argument for another day. With Citigroup trading in the low $4 per share range recently, the value of shares traded every day in this one stock alone totals approximately $1.93 Billion, yes that’s Billion with a “B”. Applying this .1% transaction levy would generate approximately $1.93 million dollars a day in this one stock alone.
For those that would complain that this levy is going to stall the financial markets, I would simply respond with “get real”. If you don’t want to pay, then don’t play. Go get yourself a real job. My guess is that day traders and some fund managers that participate in full fledged “speculation” versus “true investment” and make most of their income off of churning minute amounts of gains many, many times will protest the most. My response is I don’t care. Corporations sitting on historically high cash reserves, a market that was bailed-out and has recovered much more significantly than our national employment levels owes something. Pay the levy until unemployment returns to “normal levels of around 5%”; then, and only then, we can phase it out.
The rules for the legalized casinos that we now call “the markets” needs to change to match the times, and the benefits of providing much needed resources to support our human and social needs during massive unemployment are more than warranted. And as was said at the beginning, you have the choice to not play if you don’t want to pay.