Securities Transaction Tax

Anyone who trades or speculates in the U. S. markets should be aware of some members of Congress have been trying to pass through a Securities Transaction Tax (STT) on transactions on bonds, stocks and possibily different derivatives. There have been attempts to attach the tax to the “stimulus package”, but it was dropped in the House. But now it has been attached to a Health Care bill (HR 676).

The proposed tax has been in different forms. Usually it is 1/4% on the buying and selling of a stock, bond etc… For short-term traders, the tax is a huge impediment to profitable trading. If a trader buys $50,000 of a stock today and sells it tomorrow, the tax would be $250. If the tax is imposed on futures, selling 2 ES today and buying them back later in the day, tomorrow, next week etc… could mean a tax of about $400 at today’s prices (depending on how the tax is determined). That would put most traders and their related industries such as C2 in a tough situation and possibly out of business.

To find out more, simply google “securities transaction tax” or HR 676 (which is the current legislation that has the tax).

This idea has been floating around for a while. One of the co-sponsors of it is Rep. Dennis Kucinich of Ohio, which if you know his politics, tells you how non-mainstream this bill is. (I also have the great misfortune of living in Kucinich’s district, so he is my (gulp) congressman.)

Who knows what will happen, but this bill would basically elimiante health insurance companies, kill Wall Street and mutual funds, and cause lots of other problems. I hope it doesn’t come close to passing…

This particular bill might not pass or if it does, the STT might be taken out of it. Unfortunately, various House Democrats seem to be willing to add it to different bills and at some point it might just slip through.

this has been discussed in great detail in EliteTrader and probably other forums…

Govt sees a revenue opportunity, makes unfounded projections on how much it will raise, and will deal a death blow to many advisors, brokerages, exchanges, etc. etc.

They also see it as a way to put the burden on the securities industry, even though the small players and many businesses had nothing to do with the current crisis.

Professional traders would probably seek to go to Canada or other places.