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June 28, 2006
An interesting idea c. 1906
From the June 28, 1906 NYT: After the meeting of the Board of Governors of the Stock Exchange yesterday the following notice was sent out on the ticker..."In accordance with the amended State law the tax on sales of stocks is now 2 cents on each share, irrespective of the par value." A flat-tax rather than capital gains tax on stocks is an interesting proposal. In real terms, the two cents in 1906 is approximately $0.43 in 2005 dollars. Let's round that up to $0.50. If there were a fifty cent per share flat-tax on shares sold rather than a capital gains tax, what would be the impact on the market? As for tax revenue, yesterday's NYSE volume was 2,278,454,000 shares and yesterday's NASDAQ volume was 1,750,934,000. Four billion shares from just these two exchanges at $0.50 per share would yield $2B a day to the government for doing nothing. [Is there a more disgusting name for a tax than the "capital gain tax"?] Would a flat tax for equities ever get off the ground? Posted by Craig Depken at 12:57 PM in Economics
Comments
There's already a small "SEC Fee" (currently around $0.00009/share) on all US stock transactions. One impact on the market in London and Dublin(where most investors have a 0.5%-1% "stamp duty" on all stock transactions) has been growth in the market for "Contract for Differences" -- futures contracts where the buyer receives (or pays) the difference in value of a stock between the price at the beginning and the end of the contract. To be useful at raising revenue, any flat tax on equities will have to be complicated enough to close off all the possible loopholes. Posted by: mobile at June 28, 2006 01:47 PMI suspect you wouldn't see stock splits anymore. Eventually every stock would be trading at Berkshire's level. Posted by: cb at June 29, 2006 11:00 AM |
The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. -Adam Smith
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