Taxing the Hell Out of Wall Street
Mark Cuban proposes instituting a $0.25 per share tax on stock trades. Both sides of the trade, so it’s effectively a $0.50 tax per share.
bq.If you dont think the company you are buying is worth at least a quarter more than what you are paying , why are you buying shares ?
I can see a few effects right off the bat. First of all, nobody would buy a low-priced stock. Liquidity would evaporate for anything priced under $10/share, maybe for anything undrer $25 / share. Why would you accept a 1%, or 2.5% slippage on a trade? I don’t think Cuban’s proposal has any realistic chance of being implemented, even at a penny per share, but if it were, every company on the NYSE, AMEX and NASDAQ would start doing reverse splits to get their share price to a point where you aren’t investing from a gigantic loss.
If the data in this chart are accurate, stocks on average have returned 2%-2.5% annually (before dividends but after adjusting for inflation) over the last 140 years. If that’s correct… well, you do the math.
Second, people already pay capital gains tax, but only if they make money. Cuban wants to tax the losers as well as the winners.
Finally, what would you do with the money? Cuban proposes “giving to Main Street”, but what does that mean? Institute a national dividend? Most people can’t manage money to begin with. Pay down the national debt, as some commenters proposed? A fine idea, but after the first couple years, then what? Have the Treasury play in the derivatives market. Mark Cuban must be insane. How did he get from dismissing day traders to endorsing speculation by the government? And what makes him think that the US Treasury would fare any better at speculation than, say, Lehman Brothers? What good does it do to be short the market if the other side of the contract goes bust?
In any case, we had such a system in place previously. It wasn’t that long ago that most brokerages charged $25 or more in commissions on each trade. For a hundred shares, the kind of lots that small investors work with, that’s a quarter a share. It wasn’t a tax, it just went to the brokerages’ bottom line. Cuban acts like the market’s never crashed before. So you held P&G and were down 30% at one point yesterday? If you held the stock, so what? You’re down a few percent. Cuban purports to be an investor and freaks out when the market goes totally irrational for a couple hours.
It’s a correction. If you really are a long-term investor, that means that stocks are going on sale.
— Gordon Weakliem
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