3 An Open Letter to Traders and Investors
March 3, 2009
An open letter to traders and investors:
On February 13, 2009, Oregon Rep. Peter DeFazio introduced HR 1068 into the 1st session of the 111th Congress. He is calling his bill the “Let Wall Street Pay for Wall Street’s Bailout Act of 2009 .” Following are two key provisions included in this bill:
(5) The easiest method to raise the money from Wall Street is a securities transfer tax, a tax that has a negligible impact on the average investor.
(6) This transfer tax would be on the sale and purchase of financial instruments such as stock, options, and futures. A quarter percent (0.25) tax on financial transactions would raise approximately $150 billion a year.
As an example, if you buy and sell 100 shares of AAPL, you would pay approximately $50 on top of your trade commissions. Rep. DeFazio says that it is appropriate that Wall Street should pay for Wall Street’s bailout. His comments reflect a profound ignorance regarding our marketplace. Average traders and investors from all walks of life participate in the stock market through 401(k)s, mutual funds and college savings accounts. Furthermore, many investors have seen their account values plummet and need to make strategic buy and sell decisions to protect their assets. If HR 1068 becomes law, these Main Street investors – you and your family – will bear the brunt of the new tax. You will be taxed to sell your investments which have already lost value and you will then be taxed to reinvest your money.
The Market Guys have always been passionate advocates for participating and prospering in the markets. You know that we have always strived to help you manage risk and grow your wealth. The markets have been under extreme pressure and now is not the time to add to that pressure. Do not be deceived; this is not a tax on Wall Street – it is a tax on Main Street. Teachers, engineers, students, retirees – everyone – will fall under this proposed tax.
We urge you to contact Rep. De Fazio as well as your own representative and let them know you oppose HR 1068.
Sincerely,
AJ Monte
The Market Guys
3 Responses to “An Open Letter to Traders and Investors”
I have two questions regarding the proposed “Trader-Tax” HR 1068, which I cannot seem to find answers to.
My questions specifically pertain to how this proposed tax might apply to an individual who trades open-ended mutual funds:
1. “Would an individual who daily trades open-ended mutual funds (such as Rydex, Profunds, or Direxion — shares priced at 4pm daily) be subjected to this proposed tax? And if so, what minimum holding period would be required to avoid this proposed tax.”
2. “Would trading open-ended mutual funds in a tax deferred account (IRA, 401k, or Variable Annuity) be subjected to, or exempt from, the proposed trader tax? (i.e. funds cannot be withdrawn from such tax-deferred accounts until age 59 1/2).”
Also, in general, I would appreciate your opinion on whether this proposed Trader-Tax HR 1068 legislation is likely to pass.
Thanks very much. Jim
It is too soon to know how the tax would be levied across various transactions. As it stands, it would appear that the mutual fund would be charged the tax. The fund would then pass the tax fee on to the shareholders through increased fund expenses. This would be true whether the account was taxable or qualified.
Thank You Rick for sharing your thoughts,..very much appreciated.
Regards, Jim P.
Leave a Reply