Currently our federal taxation of financial instruments creates perverse incentives – dividends and capital gains are taxed, which takes a bite out of the income generated by prudent investment (buying and holding profitable companies), while speculation is rewarded.
Replacing the dividend tax (at least on US companies) with a per-share transaction fee on stock sales (of say, $.05 per share sold) would strongly discourage speculation, make investing less volatile and safer for amateur investors (luring new investment), and drive up the value of dividend-paying stocks. This change could also be structured to raise more $$ for the federal government, reducing the deficit.
Ian Elder
The fee sounds good, but why replace the dividend tax? It could, of course, be part of a compromise in order to get the thing passed, but only if the fee raised revenues higher in the long term than the cost of removing the dividend tax. Otherwise, it sounds like a regressive cut.
In a conceptual sense, the dividend tax is also a bit cleaner than the transaction fee. While the former is really an implication of the income tax, the second looks more like market interference.
As a liberal, I could deal with having both taxes, but the switch seems like an odd thing to push.
Jesse Laymon
Ian-
I could deal with having both taxes as well, for the same reasons as you.
But mostly I’m just trying to get across that if we had to collect the same revenue in one way or another, we’d be better off doing it in a way that discourages speculation and volatility than in a way that discourages long-term investment.
Every tax, regulation, or expenditure constitutes some form of market interference – that’s unavoidable. I figure if we’re going to have taxes that create a certain incentive structure (which all do), let’s at least have it be a positive one!
Diana Yousef-Martinek
However, in addition to this, policies should be put in place to re-open the IPO window, so that those who want to invest in early-stage technology ventures (esp. in biotech, cleantech, etc) have a better chance of exiting their investments, and for these startup companies to be able to access public markets in order to raise much-needed financing.
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