Bill Gates Advocates Tax On Financial Transactions 694
First time accepted submitter wanzeo writes "With the current G-20 summit dominated by global financial uncertainty, previously unsuccessful tax strategies are getting new attention. In a short interview with the BBC, Bill Gates explains his support for a potential tax on financial transactions. The concept is sometimes called the Tobin tax after its originator, Nobel Laureate economist James Tobin, who first put forth the idea in 1972. Gates points to the success of Britain's Security Settlement Tax, and suggests that large economies like Germany, France, and the U.S. have expressed interest in his plan."
A first (Score:5, Insightful)
This might be one of those rare times when I actually agree with Bill Gates. A tax on financial transactions should reduce or stop some of the most exploitive behavior in the financial world. "High frequency" trading would become much less profitable, as would the even less ethical exploit of attempting to generate out of date quotes by overloading a trading system system.
No love for financial institutions. (Score:5, Insightful)
... but the government needs to overhaul the system of taxation to a simple system without loopholes, and stop trying to figure out a way to tax everything we do. Once upon a time we didn't even need income taxes; times change, but having the government intrude on every aspect of our lives so that they can tax every little thing is not the way to go.
You have to ask what is the purpose of taxes to begin with; why do we need them and what's the most effective way to accomplish that, not keep coming up with new schemes that likely can have negative impacts on the economy. Every time the government creates a new tax, the cost of compliance adds to the amount that the government collects; more accountants need to be paid, more paperwork needs to be filled out.... the cost of compliance for the current system (not the taxes paid, but the resources spent figuring out what to pay). The tax foundation projects compliance costs to be in the hundreds of billions (Total Federal Income Tax Compliance Costs, 1990-2015 [taxfoundation.org]).
There's got to be a better way - overhaul the tax system, don't keep adding to the mess it already is.
If we don't stop this nonsense, we're going to be taxed for every action we take and the fourth amendment will be a joke. You'll have a federal tax on food (eat beef? Well, beef causes global warming, so you'll have to pay), a commute to work tax; have coffee break tax; drive anywhere tax (this will be beyond what we already pay in gasoline taxes). Every time money changes hands? Is that what you really want? Lend me $20 and pay a tax? How about both of us? Lender tax and borrower tax, and then a pay-you-back (loan repayment) tax. How about a tax on getting money from your ATM? Or transferring money from one account to another? Or every time you pay a bill? It's simply ridiculous to continue along this path.
Re:And now lets word it to screw the little guy. (Score:3, Insightful)
Re:A first (Score:5, Insightful)
While I'm on the fence about the tax, I am definitely with you on making high frequency trading as difficult and least profitable as possible.
HFT is what crashes markets at a moment's notice. It can destroy companies in a matter of minutes. And it also an affront to the entire concept of a market where well informed buyers make well informed decisions about the value of a product.
Re:Instead of Financial transactions? (Score:2, Insightful)
My problem is not simply a tax on exchange of currency, although as someone who travels internationally, do I really have to pay an extra tax to exchange currency? That would suck. It's already too expensive to travel.
No, my problem is that all the government seems to want to do is find new ways to tax people.... they want to tax everything, and the reasons people suggest for doing it are not conducive to economic freedoms and liberty - often they just want to effect social change, which is the wrong reason for taxes.
We don't need yet-another-tax, we need a tax system overhaul that simplifies and removes loopholes. The Tax Foundation (link in my other post on this subject) suggests the costs of compliance to be in the hundreds of billions of dollars.... why make it worse?
Re:A first (Score:4, Insightful)
He earned his billions by actually producing a product rather than shuffling money around in HFT. I didn't like some of Microsoft's business practices when he was running the show, but it's not even in the same league as Gold Mansacks.
Re:A first (Score:5, Insightful)
Yup, because the whole stock market was a volatile mess before HFT came along, and now that we have this miracle mechanism, nothing EVAR goes wrong.
EVAR.
Re:No love for financial institutions. (Score:5, Insightful)
Re:A first (Score:5, Insightful)
Americans try to solve all the world's problems with a tax. It makes no sense.
No, they are just trying to solve one problem with tax - the fact that they are bankrupt. They are bankrupt, however, because they try to solve all the world's problems by spending money.
This would be much better for establishing stability in the markets.
High frequency trading results in very stable markets. To wit, I present the case that the market is at the same place it was since 1998. If jogging in place for 13 years isn't "stability" I don't know what is.
Re:No love for financial institutions. (Score:5, Insightful)
I think you missing the point of transaction tax. In this particular case, the goal is not so much to create new source of revenue, but to make most dangerous (for the world economy as a whole point of view) trading practices unaffordable. High Frequency Trading makes tons of money out of thin air. No one gets any better except select few trading houses which have enough muscle to participate in this. The transaction tax may have many consequences, but at the very least it will make stock market little bit less rigged.
Re:No love for financial institutions. (Score:4, Insightful)
... but the government needs to overhaul the system of taxation to a simple system without loopholes, and stop trying to figure out a way to tax everything we do. Once upon a time we didn't even need income taxes; times change, but having the government intrude on every aspect of our lives so that they can tax every little thing is not the way to go.
Unfortunately, the government isn't the only problem here. Here in Norway we have an oil fund yet at the same time lots of toll roads and toll circles around cities. We're taking up debt so loaning and saving at the same time, while adding a bunch of overhead to boot and really the result is often unjust all the same. We'd do a lot better just adding to the petrol tax and saying that yes we're maintaining a road network, some of you get a new road and others don't but it even outs over time. Instead we have to try millimeter-measuring out costs with tolls. But you'd also get a shitstorm of people feeling this is unfair. People are very much there that "I don't want to pay for that road, let those that use it do" and then you have to keep track of who's using it and who's not. Now it's just electronic pass keys and photo identification, no anonymous cash payments. Somewhere there's a record of every car passing every toll point, which supposedly gets deleted but it certainly is collected.
Re:A first (Score:5, Insightful)
Yes, and with high frequency trading - and trading in general - being less profitable you can expect less liquidity, larger spreads between the bid and ask price, and much greater volatility in the markets. Well done.
Or, to put it another way, more incentive to hold on to shares as long term investment and maybe start giving a fuck about whether the enterprises they represent are actually creating sustainable wealth, and think about the wider consequences of the trades you make, rather than treating them as casino chips. But, hey, if it ain't broke don't fix it. Oh, wait, it is broke...
Plus, in case you haven't been reading the news for the last 3 years, the financial sector owes us some money.
Re:Instead of Financial transactions? (Score:5, Insightful)
No, my problem is that all the government seems to want to do is find new ways to tax people..
"The" government? I pay taxes to more than one government. There's Federal tax, state tax, and local tax. As to the Feds, Federal taxes are lower than they've been in 60 years. TFA is a red herring; rather than taxing financial transactions, why not simply tax Capital Gains as income (as well as get rid of loopholes like the mortgage deduction and the charity deduction)? Why should someone who "earns" $75k gambling on the stock market pay half the tax of someone earning $75k working as a roofer? The stock answer to that is "the stock market investor has huge risks!" Really? He's only risking money, the roofer risks his very LIFE.
The stock market gambler should be paying twice the tax the roofer pays. The roofer is creating wealth, the gambler simply shuffles it around and leeches off of it. TAX WALL STREET.
Re:Stocks, bonds, derivatives, or foreign currency (Score:5, Insightful)
It should not be limited to large trades.
Right now the high-frequency traders are basically stealing. They jump in front of other peoples' trades by milliseconds, holding no trade position at the end of the day. It has nothing to do with the purpose of a stock exchange. It does not create capital, value or liquidity. It's a hack, pure and simple, and it's costing the rest of us a ton of money by increasing volatility where there would otherwise not be volatility. They are the griefers of the financial sector.
All you'd have to do is make this a very small tax for it to have a very positive effect, both on the bottom line and on the health and stability of the marketplace.
Plus, since we're talking about a very small amount, it would not hurt all of the retirees who were suckered into 401ks and Roth IRAs instead of proper pensions.
When did Wall Street prove it was useful? (Score:5, Insightful)
We get so excited about the debate of "should we tax or shouldn't we" -- we forget the debate about; "Why do we have a 'Wall Street' to begin with?"
Turning over a stock in anything less than three years, and definitely less than 1 year is NOT an investment in a company -- it's an attempt to "play the market." One or two day traders might win at this -- but the professionals, who have machines that can trade in nanoseconds and shave time with the competition by using shorter network lengths to WS computers for trades are going to win. Market manipulation is also too lucrative to worry about the SEC and such -- much better to buy the regulators (as we've seen).
>> However, when we consider the Trillions more that our Government had to bail out Wall Street more than just the public "TARP funds" -- and that banks like Bank of America might be posting bigger losses in the range of $75 Trillion with the FDIC backing them. So a few pennies a trade will require a few hundred years just to PAY BACK expenses they've incurred -- much less "cover" future risks.
Another way to say this is; who is MORE crazy? The person who wants to tax the Mafia or the person who thinks you cannot trust the mafia in the first place? There is no way a group that can get the FDIC to cover $75 Trillion in "bad bets" after the fact, and AFTER a bail out for the same "mistake" (I call it fraud), is a group that CANNOT get around any tax. The Day Trader will see a tax, but if there is enough of a fee to stop the market manipulators -- be sure that they will get compensated where you are not looking.
Wall Street's EXCUSE to suck up 40% of all profits is that they help provide funds to let companies grow -- having seen the rampant leveraged buyouts, the VC funds used to sell away parts of companies, and the shuttering of tens of thousands of businesses to provide "fodder" for Hedge Funds -- it's a bit like allowing a Mercenary to continue to operate in a country after wiping out a town, because you've seen him walk a little old lady across the street once.
I once made my living with Financial Services companies -- but it felt a bit like carrying ammunition for a mercenary. Biting the hand that feeds you should be a mark of integrity, and I'd like to make a living building something or making the world a better place. ALL Financial services are a ruse, because they are predicated on "investing wisely" -- which is always a pitch of "getting back more than you put in." For every wise investment to do better than just the average of stocks, SOMEONE has to lose. By the time a company has stocks on Wall Street, it's either on someone's menu or it has all the money it needs -- and some VC firm reaped that benefit before you did.
Re:A first (Score:4, Insightful)
I don't live on credit, Don't have a mortgage, my wages now buy less than they did ... and there is little prospect of them going up any time soon ... Can I have my buying power back please
Markets for Markets (Score:5, Insightful)
While I'm on the fence about the tax, I am definitely with you on making high frequency trading as difficult and least profitable as possible.
Most people know this and the only people who like high-frequency trading are those who profit from it directly. The markets work for these traders and these traders work for the markets.
Normal people and the companies listed on the markets are hurt by this arrangement. They would gladly take their business to another market that had more sane trading rules.
Which gets to the actual problem - regulations on securities markets. We have a classic example of regulatory capture here, so starting a competing market is effectively impossible. NASDAQ couldn't happen today.
Like anything else there needs to be a market in markets (sup, dawg), and this has been prevented from happening, so we wind up in this surrealistic position with markets that hurt most of its participants to enrich the very few (a net transfer of wealth). The 1% isn't just on Wall Street - their accomplices in Washington are essential to the mechanism.
Re:No love for financial institutions. (Score:4, Insightful)
Absolutely. I don't understand what's so hard about saying "regardless of its source, all of your income just counts as income, minus some deductions, and you pay a percentage in tax based on these brackets".
Because you're not a politician who's being lobbied to give everyone tax breaks and loopholes so that only the powerless middle-class proles have to actually pay anything.
Re:A first (Score:4, Insightful)
Re:A first (Score:5, Insightful)
I know, it is like the market has not seen 2 big bubbles pop, or record high unemployment or the largest budget gap in the history of the US.
I mean if the DOW's current price has not changed much in 13 years we can thank the benefits of "High frequency trading" for this stability!
Re:No love for financial institutions. (Score:5, Insightful)
'Rich' people spend less (as a portion of income), but have more money to spend in total. Poor people spend more (as a portion of income), but have less money to spend in total. Do you not see a problem here...?
We already have lots of poor people who can barely afford essentials and sales tax is the most direct tax they see. Income tax is the reverse in that it is meant to tax the amount of money you have rather than the amount you spend. High sales taxes encourage those who can afford to to save. High income taxes encourage you to make the most of what you have in total, and save or not as you wish.
Re:Stocks, bonds, derivatives, or foreign currency (Score:2, Insightful)
They aren't front running. They're doing some things that are far far far more sophisticated and nearly impossible for the SEC to catch, whereas front running is fairly straight forward.
They have the ability to do tons and tons of small trades very fast and they can measure the price pressure in the market, they also can start to blind people with volatility as a side effect. As they measure the price pressure, if they have deep enough pockets and resources, they can mask the prices changes others see, simply by countering bid and call prices. A stock could be tanking, they could potentially prop it up for a while and keep it from looking like its tanking by biding higher all while preparing to dump. Think of it this way, they're probably 2 degrees beyond simple front-running, they're trying to game the other guys high frequency trading software. They're several steps ahead of the law and they can do better this way than by simply front-running.
When we tell the pensions and everyone to plan for retirement with a 401k or an IRA, split between some fixed income and high risk stock like equities we're telling people to do something fundamentally different than how the big wall street guys approach the market, these are long holding accounts. If you want any stability at all, we need a graduated tax on how long you hold something, which also reduces liquidity and causes other gigantic problems for the big wall street guys. There is no good at all in holding a stock for minutes. There is arguably little good in holding it for a day. Worse, withdraw from a retirement account and you pay penalties, you have to keep the money there when wallstreet can flash trade and hold things for milliseconds with no penalties... I'd say if you hold an equity for less than a day, there should maybe be a fairly stiff tax on it 5% of the total value + some percentage on the change in value, less than a week, it cuts in half, up to a month it cuts in half again, hold it a year and that tax goes away. All that kills liquidity though, maybe the stock market needs less liquidity since we're all banking our retirement on it in some capacity (and even if you aren't, there isn't much you can invest in that isn't going to be affected by the market... assuming you're investing with any growth in mind.)
Re:A first (Score:4, Insightful)
Crazy. A website devoted to nerds where so many people rail against automation and computerization. WTF slashdot.
Technology can be used for good, or not good. Unless you're one of the 0.1% who benefit directly from profits of high frequency trading, or maybe the 0.2% who benefit from the millisecond liquidity afforded by the high frequency traders, I'd call it not good for "the rest of us."
If securities trading liquidity was dragged back to where it took (gasp) a whole day to buy or sell, I don't think the majority of the world would suffer, just those guys that make money in trading. Use automation and computerization to execute those daily trades efficiently, but don't make our financial markets a god damned casino.
Re:A first (Score:4, Insightful)