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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 |