Good Taxes

Yeah, I know. There isn’t such a thing as a good tax.

Well, maybe there is. Let’s think about it for a moment.

As illustrated by the graphic, Wall Street got a huge tax break. Actually, they got a lot of our tax money. That in addition to several reams of tax breaks, subsidies and such that they have been getting all along.

I would like to see them bear some of the load for the disaster they created.

It appears that the world is coming to a consensus. The G-20 will be meeting in June of this year and some of the major players have finally come to the realization that we ought to tax the large banks; those too big to fail.

Before we go too much further I would like to point out that there is no such thing as a bank too big to fail. That is purely self-serving propaganda.

There is one other matter that needs to be cleared up. Before you start worrying that this means a tax on your checking account, forget that. These taxes are directed at the investment banks, not the commercial banks.

There is, as yet, no agreement on the nature of the tax, its size or term. It is not a time to get your hopes up quite yet but France, Germany, Sweden, the US and others are making proposals.

The United Kingdom has already imposed a 50% one-time tax on bonuses. That’s nice but not to the point. It’s the banks themselves that are, or should be, the primary focus.

Some are proposing an advance tax to put into a pool to cover future bailouts. Thankfully, the US opposes that. Their position is that such a pool would encourage the banks to take risks, knowing they would be bailed out. That may be better than you and me failing them out but doesn’t really solve the problem.

It’s too early to see the direction that may emerge. Just be glad the issue is on the table.

There is an even better idea. This is not a substitute for a bank tax. It is, I feel, a necessary adjunct. Put a tax on every share traded on Wall Street. Just a penny tax on each share as it is traded would result in a surprisingly large windfall to our very needy Treasury. Compared to how much the traders are being ripped off by the brokerage firms and investment banks, a penny is inconsequential to them.

We can, and should, go even further. Money put in the stock market is called an investment. It is said to be so important that people need an incentive to provide the market with money. They call this capital, again incorrectly. That incentive is a taxable rate far less than that paid by people who actually worked for an almost living.

Relatively little of the trading in the market is actually investment. Maybe I buy some stock when a corporation sells new stock to raise some capital. That is an investment. But, if I pay a hundred dollars for the stock and sell it to you for a thousand and you turn around and sell it to your brother-in-law for five thousand, the corporation still got only a hundred dollars, minus brokerage fees and anything else they can think up.

You didn’t invest. You gambled, and won. Your brother-in-law gambled. You’re likely hoping he is going to lose.

The tax code needs to distinguish between investing and gambling. I know that they have a small, unimportant caveat in the tax code but it is little more than window dressing.

People will invest even without that much of a tax incentive. Why? Because some still see it as preferable to actually working. You know the old saw, “Let your money work for you.” What we have is a tax code skewered against actual work and benefiting people who are wealthy and lazy.

If we tax people at the same rate for investing as for working, what do we do about those who are simply gambling? We tax them at a higher rate. Why? Because working benefits our economy. Investing benefits our economy. Gambling distorts our economy and leads to the kind of situation we are now enduring. Why not?

These suggestions are not widely considered. They are not popular with those in charge. Therefore, I doubt that too many bean counters have warmed up their calculators and worked out the numbers. Simply blue-skying it, however, one can foresee a reduced deficit.

But, that’s not all. There would be far less volatility in those numbers in the bottom right-hand corner of your television screen when you watch the news channels. We might even be able to eliminate that bottom line on the tube and replace it with the legs of that blond talking hairspray depository.

If you haven’t guessed what motivated me to spend time thinking about this, I will confess. I am recovering from my annual headache marathon on behalf of the IRS.