Posted: Thursday, December 10, 2009 11:00 AM
Ag groups call financial tax counterproductive
Spokeswoman says action 'would put jobs at risk'
By WES SANDER
Capital Press
Commodity groups oppose a tax on trading financial instruments proposed by Rep. Peter DeFazio, D-Ore.
The bill -- HR 4191, the "Let Wall Street Pay for the Restoration of Main Street Act" -- was introduced in the U.S. House of Representatives on Thursday, Dec. 3. Sen. Tom Harkin, D-Iowa, was expected to introduce matching legislation this week.
DeFazio calls it a "minuscule" tax, amounting to 0.25 percent of stock transactions and 0.02 percent of the sale of futures contracts.
Farmers and ranchers use futures contracts as a hedge against price fluctuations, as do elevators that buy and sell grain.
Bethany Shively, spokeswoman for the National Cattlemen's Beef Association, said such a tax would impact a producer's effort to stay in business by buying and selling futures.
"Any additional taxes or fees on these instruments would be a tax on ag producers, and that is unacceptable," Shively said. "This type of proposal would put jobs at risk, not help offset their creation."
DeFazio said the tax could raise $150 billion annually. Half of that will fund job-creation programs and half will go directly to reducing the federal deficit, he said.
DeFazio said the measure skirts the middle class by exempting retirement, education- and health-savings accounts from the tax, and $100,000 in taxable transactions would be exempted annually.
Daren Coppock, CEO of the National Association of Wheat Growers, said the tax would only degrade the markets that commodity growers rely on to help moderate exposure to market swings.
"Adding a tax on financial instruments and futures contracts would be counterproductive to the goal of helping those markets recover or function more efficiently," Coppock said.
Comments made about this article
Posted By: On: 12/10/2009
Title:
Thank you for this article. This is a Main Street tax disguised as a tax on Wall Street. There are more than two dozen members of Congress that are pushing this tax. This is so wrong that I cannot believe it is being proposed. Is this America anymore?
There will be extreme high and low ranges of commodity prices as there will be no short-term trades to dampen the volatility of longer term price movements.
---"DeFazio calls it a "minuscule" tax, amounting to 0.25 percent of stock transactions and 0.02 percent of the sale of futures contracts."
The tax itself is minuscule compared to the hidden costs that will be multiples higher than the tax. This tax will shut down trading as we know it. I expect trading volume and liquidity to drop 90+% as those short-term trades cannot yield a huge 0.5% round trip for stocks and it won't be much better with futures at 0.02% (and this is just the introductory rate - once they get their foot in the door, the tax will be 2%). Bid-ask spread will increase by multiples. Broker fees will increase substantially to stay in business as trading revenue is virtually stopped overnight and brokers go broke. For those saving for retirement, the yield will be reduced a couple percent per year and the reduced compounding over a lifetime will reduce total fund yield at least 1/3 to 1/2.
---"DeFazio said the tax could raise $150 billion annually."
An outrageous lie. The entire securities industry is one of the largest US industries with pre-tax profits averaging only $22B per year in the best years and billions negative the last 3 years. Where is the other $128 billion going to come from, Main Street?
---"DeFazio said the measure skirts the middle class by exempting retirement,...."
More nonsense. Mutual fund managers will have to pay the tax and increased spreads and pass it onto us. And you cannot have a market without the market makers, and will they be tax exempt, or will the cost of the tax that they pay have to be passed onto the so called exempt investor? Rather ironic isn't it? They can't let the public hear about this or the whole scam will come crashing down.