When the House of Representatives introduced H.R. 1068, they ignited fierce opposition from traders who opposed its proposed tax on securities. The bill, called the “Let Wall Street Pay for Wall Street’s Bailout Act of 2009,” calls for a 0.25% transfer tax on the sale and purchase of financial instruments including stocks, options and futures.
The bill was introduced on Feb. 13 by Rep. Peter DeFazio (D-Ore.) and the backlash soon followed. One petition against it says, if passed, it would lower capital gains, reduce liquidity and negatively affect the average investor due to increased transaction costs.
John Joseph, principal and founder of The SEMA4 Group, says the bill is unlikely to pass on its own. “However, the danger is that it gets tacked onto a much larger bill and passes with little discussion. If it does pass, the vast majority of trading activity will simply move overseas. The U.S. markets would have essentially no liquidity and it would become extremely difficult for U.S. public companies to raise capital,” he says.
Former CFTC Chairman Philip McBride Johnson says the bill would unfairly punish the futures industry. “Last time I looked the regulated futures and options markets have cost the taxpayer exactly zero. Don’t let the banking and securities mess get bailed out by the only people who did it right,” he says.
