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Dear Trading Concepts
Student,
Congressman Peter DeFazio introduced
H.R. 1068: “Let Wall Street Pay for Wall Street's Bailout Act of
2009” on 13February2009. This bill imposes a 0.25% transaction tax
on the “value of the sale and purchase of financial instruments
such as stock, options, and futures contracts.” While HR1068 seeks
to engender populist appeal by ostensibly exacting monetary
retribution against the big Wall Street firms for wreaking havoc
upon the American financial system, its effects will hurt EVERY
American who trades professionally as well as the ordinary
investor trying to save for the future. The 0.25% tax is invoked
against the VALUE of every purchase AND sale of typical financial
instruments, resulting in an egregious added cost borne by every
American for each investment or trading transaction they make,
even within the realm of an IRA or 401K account. It is
particularly grievous that this tax is imposed upon the
transaction itself, regardless of whether the purchase / sale
generates a profit. The bill will have virtually no effect upon
the behavior of the relatively few Wall Street executives whose
reckless decisions contributed to the current financial crisis, as
added costs would in all likelihood be passed on in some form to
customers. Further, the bill would have the effect of diminishing
capital provision, as it discourages investment to a degree even
beyond the negative impact of capital gains taxation.
HR1068
MUST BE STOPPED!! THE BEST WAY TO ENSURE HR1068 NEVER BECOMES LAW
IS TO MAKE YOUR OPPOSITION FORCEFULLY AND UNAMBIGUOUSLY KNOWN TO
YOUR CONGRESSMEN AND SENATORS!!!
HR1068 is currently in Committee [House
Ways and Means] for markup and debate, so Congress needs to hear
from traders and investors quickly and massively in
opposition. Further, the bill has already garnered air time in
the media, thus it is gaining visibility.
Attached/below is a pre-composed letter
response for your use in writing to your Congressmen and Senators.
However, be advised that the most effective means of
response in voicing protest regarding HR1068 is to call
your Congressman's/Senators' office. The next most effective
means of communication is via actual mail. The least
effective [though still viable] means of communicating your
displeasure regarding HR1068 is via email. You can obtain the
contact information for your Congressman and Senators via http://www.govtrack.us/congress/.
You can track the current status of HR1068 as it goes through the
legislative process via http://www.govtrack.us/congress/bill.xpd?bill=h111-1068
.
Thank you for taking your valuable time
to read the above comments and statements about HR1068.
Have a great day and I truly hope you decide to help in preventing
this from passing.
Once again, the letter below can be
used to email and mail your Senator and Congressman. It needs some
modification on your part, but it would greatly help HR1068
from passing.
Sincerely,
Todd M.
Mitchell
President & Founder of Trading Concepts,
Inc.
Date of Mailing
Mr./Mrs./Ms. Your Name
Street
Address
City, State
Zip Code
Congressman [or Senator] Xxxxx Xxxxxxx
Street
Address
City, State
Zip Code
Dear Congressman [or
Senator] Xxxxxxx,
On 13 February 2009 Congressman Peter
DeFazio introduced H.R. 1068: “Let Wall Street Pay for Wall
Street's Bailout Act of 2009”, which aims to impose a 0.25%
transaction tax on the “sale and purchase of financial instruments
such as stock, options, and futures contracts.” The title of this
bill certainly has popular appeal, which is understandable.
Without a doubt, I wholeheartedly support and encourage Congress
using all its power to investigate those executives in the Wall
Street firms who have broken the law, and whose reckless decisions
have helped create the present financial crisis. Like so many
American citizens, I am appalled at the recent behavior of large
Wall Street companies, and the idea of making those firms who are
responsible for putting the global financial system in jeopardy
help to repay taxpayers for the bailout is certainly justifiable.
Unfortunately, HR1068 is the wrong way to do that, as this
tax applies to ALL investors, the vast majority of whom have done
no wrong. Effectively, this tax will punish anyone who wants to
save their money, whether by investing in stocks or options
directly, putting their hard earned money in any mutual fund, or
by simply placing a portion of their paycheck in a 401K. While the
proprietary trading operations of the big Wall Street firms would
also be affected by such a tax, their brokerage operations will
not suffer, as the tax would be passed on to customers in the form
of additional transaction fees. Further, banks and mutual fund
companies who execute clients' transactions will also pass along
this added cost to their customers, many of whom are ordinary
retail investors as opposed to large institutional investors. This
bill would have the chilling effect of further discouraging
Americans from saving and investing for their futures, as well as
the futures of their families. We who are attempting to
responsibly save for our families' future are ALREADY taxed for
such efforts in the form of capital gains tax.
The
unintended consequences associated with H.R. 1068 are hard to
ignore and pose ominous effects for ordinary Americans, small
businesses, and entrepreneurs, as well as the markets
themselves.
The HR1068 tax will lower gains made by
ordinary Americans in their 401k and IRA investments, exacerbating
the already difficult economic situation many Americans face
currently as well as in the future. It has the effect of forcing
individual American investors and savers to pay even more for the
excessively irresponsible behavior of reckless Wall Street
executives.
The text of HR1068 claims that such a tax would
have a negligible impact on the ordinary investor. This is
completely and utterly inaccurate! For example, if I buy 100
shares of a $100 stock [approximately the price of Apple stock],
this costs me $10,000 plus brokerage fees. Assume that I decide
later to sell the shares at the same price [if my analysis of the
prospective outlook for Apple no longer supports the position].
This sale of the stock would also be a $10,000 transaction, but
the proceeds of the sale are diminished by brokerage fees. Under
HR1068, I would also be taxed on both the purchase value and the
sale value of the stock; in this case, a 0.25% tax on $20,000 for
an additional $50 cost of executing the transaction....and I have
to pay this tax regardless of whether or not I profit from the
investment! It is noteworthy that 100 shares is generally
considered to be a minimum size for a stock investment; purchasing
a larger block of shares would impose even more devastating costs
upon ordinary investors, again, whether they profit or not from
the investment.
Additionally, many hard-working Americans
make their living by operating small businesses that trade stocks,
options and other financial instruments. These businesses provide
essential liquidity to the American markets, creating the most
efficient market exchanges in the world. This transaction tax will
have a huge negative impact on these small businesses' ability to
compete and survive in a market that is already extremely
cost-competitive. The HR 1068 tax punishes such entrepreneurs
merely for conducting their business operations, whether they earn
a profit or not. This is akin to Congress taxing Ford, GM, or
Chrysler solely and exclusively for the act of manufacturing a
car, as opposed to taxing the profit made on the sale of the car.
In addition, those Americans who work for small trading businesses
could face layoffs due to the increased costs imposed by
HR1068.
American markets are the most liquid markets in the
world; this is one reason so many foreign investors invest their
capital in American companies via American exchanges. The HR1068
tax will undoubtedly affect the number of shares traded on an
absolute basis, thus reducing liquidity – a necessary ingredient
in the effective pricing of assets. It is noteworthy that the
complete lack of price discovery and associated absence of
liquidity accelerated the drop in "value" of collateralized
mortgage obligations, which has aggravated the current financial
crisis. HR1068 would actually encourage American investors to take
their investment capital to foreign markets and foreign companies
instead of investing here in American companies.
Why is
Congress considering a bill that would effectively discourage
Americans from saving and investing for their own futures, and in
American companies via American markets? Congress should encourage
Americans to save and invest! The collective investments from
ordinary Americans through IRA and 401K plans provide essential
capital for American small businesses and entrepreneurs; it is
these same small business owners who provide the majority of jobs
in the United States. In the current credit crisis, with capital
for investment in labor, plants and equipment by businesses so
difficult to obtain, why would Congress make this problem even
more insurmountable? How can Congress essentially discourage
provision of much needed capital for businesses in such difficult
economic times that are remarkably comparable to the Great
Depression?
I, and all other taxpaying American citizens
are already paying for the Wall Street bailout in the form of
unspeakable increases in the national debt and what will certainly
be a future devaluation of the dollar. HR1068 would only increase
that burden upon ordinary American citizens for the irresponsible
and reckless behavior of a few Wall Street executives.
HR1068 may sound good on a populist appeal (i.e. let's get
back at the Wall Street crooks and make them pay for this mess
they helped create), but the ultimate effect of taxing investment
transactions will hurt ordinary law abiding, responsible Americans
who want to invest their money in America and will ruin many small
business people who invest as a profession.
I implore you
to vote NO on H.R. 1068, and to use all your influence with your
colleagues on both sides of the aisle and in both houses of
Congress to defeat this bill!
Respectfully,
Your Signature |