Home About Archives RSS Feed

The Independent Investor: Robin Hood Would Be Proud

By Bill Schmick
iBerkshires Columnist
Taxes are not my favorite thing. Like everyone else, I would like to see less, rather than more, taxes in my life. However, there is one tax under consideration in Congress that I fully support

Some call it the "Robin Hood Tax" (part of HR 3313) because it supposedly taxes the rich and distributes the proceeds to the rest of us peons. It is a bit more complicated than that, but you get the idea. Some say the proposal surfaced as a result of the Occupy Wall Street movement. Others credit the late Noble prize-winning economist James Tobin for the idea. The basic thrust is to impose a financial speculation tax of .03 percent or $3 in taxes for each $10,000 in financial transactions.

Although it doesn't sound like much of a tax, its proponents claim it could generate as much as $48 billion or more per year if all G-20 countries signed on to implement the tax.

In Europe, where every nation is scrambling to raise money, the idea is supported by the European Commission in Brussels that would like to see as much as $10 per $10,000 tax in place throughout Europe by 2014. The Italians, under their new Prime Minister Mario Monti, is planning to impose the tax as part of his country's fiscal reform plan. Both the French and German leaders are on record as backing the idea and even Pope Benedict XVI came out in support of it.

In the United States, the idea has found surprising support among some strange bedfellows. Bill Gates, George Soros, Ralph Nader, Al Gore, the nurses union and the AFL-CIO among others. As such, a bill to impose a tax on certain trading transactions in financial markets (part of H.R. 3313) is working its way through Congress. All the sponsors of the bill are democrats.

Republicans oppose it, which should come as no surprise since the vast majority of Republicans won't even read a proposal to raise taxes of any sort. Surprisingly, the White House and Britain's Prime Minister David Cameron are less than enthusiastic about it. Both feel it might jeopardize their country's leadership positions within financial markets where such a tax may drive traders elsewhere to do their business. The White House also believes it would hurt pension funds and the banks.

In my opinion those are lame arguments and don't square with the facts. For instance, both Hong Kong and Singapore, two fast-growing financial markets, already charge a $20 per $10,000 transaction tax. Great Britain, the leading financial center in Europe, has had a stamp tax in force for 25 years called the Stamp Duty Reserve Tax on most paperless trades of companies located or registered in the UK. It has not impacted the financial status of those markets one whit.

The Securities Industry is against it (surprise, surprise) warning that such a tax would impede efficiency, depth and liquidity in the markets as well as raise costs to issuers, pensions and investors.

What the tax will do, in my opinion, is reduce the speculation in global markets while generating much-needed revenues. Speculation, in the form of High Frequency Trading (HFT) is the bane of our existence. These traders buy and sell blocks of stocks, bonds and exchange traded funds second by second, minute by minute in large volumes throughout the day generating thin but profitable trades that add up. They could care less about a company's earnings or its future prospects. When a stock drops, hundreds, if not thousands, of HFTs and day traders jump on the trade, like vultures over a wounded animal, they drive their victim to its knees before going on to their next prey, all in the name of profit.

A $3, $5 or even $10 tax on these transactions will crater that market and do much to reduce global volatility. Who knows, actual investing may come back into vogue and with it the retail investor. Sure, the tax may hurt the little guy but the individual investor usually doesn't trade 10 or 15 times a day at $10,000 a crack.

Detractors argue that it is not HFT but the circumstances of the market, such as the European crisis, that is responsible for the volatility. I agree that the problems we face worldwide do create volatility and always have, but the markets have never reacted with the level of violent swings and almost daily market volatility that we experience today.

So I say string your bows, Oh, ye Merry Men, let arrows fly and support this transaction tax.

Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at (toll free) or email him at wschmick@fairpoint.net. Visit www.afewdollarsmore.com for more of Bill's insights.


Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
Northern Berkshire EMS Debuts at Ambulance Service's 40th Anniversary
Adams Selectmen Review Subcommittee & Liaison Assignments
Harrington Kicks Off Campaign For District Attorney
Williamstown Fire District Passes All Articles
College Notes: May 2018
Northern Berkshire United Way Celebrates Spirit of Caring and Celebration
Italian Community Pushes Back On Renaming Of Columbus Day
North Adams Happenings: May 23-29
You Can Still Gain Tax Benefits from Charitable Donations
Efforts to Create Rural Transportation Options Turn to Private Sector

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.




@theMarket (258)
Independent Investor (352)
May 2018 (5)
May 2017 (2)
April 2018 (7)
March 2018 (6)
February 2018 (7)
January 2018 (7)
December 2017 (8)
November 2017 (5)
October 2017 (5)
September 2017 (5)
July 2017 (2)
June 2017 (8)
Stock Market Interest Rates Greece Jobs Bailout Banks Energy Debt Ceiling Metals Oil Currency Selloff Election Europe Stimulus Japan Taxes Congress Housing Stocks Economy Europe Recession Markets Pullback Crisis Euro Commodities Retirement Federal Reserve Deficit Wall Street Rally Fiscal Cliff Debt
Popular Entries:
The Independent Investor: Don't Fight the Fed
@theMarket: QE II Supports the Markets
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: Markets Are Going Higher
The Independent Investor: Does Cash Mean Currencies?
The Independent Investor: General Motors — Back to the Future
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Will the Municipal Bond Massacre Continue?
Recent Entries:
The Independent Investor: Are Americans Saving Enough for Retirement?
@the Market: Stocks Look Ready to Reach New Highs
The Independent Investor: What's Up With Oil?
@theMarket: China Worries Dominate Markets
The Independent Investor: Financial Scams Targeted at Elderly Are Epidemic
@theMarket: Peak Earnings Versus the Yield Curve
The Independent Investor: The Opioid Effect
@theMarket: Earnings Up; Stocks, Not So Much
The Independent Investor: Why the Tax Cuts Are Unpopular Among Americans
The Independent Investor: The Facebook Fallacy