There is a lot of talk about a transaction TAX in the US. One can argue whether it is punitive, driven by vigilante populism or a legitimate safety mechanism a la Tobin. One of the sub-fields of anthropology is archaeology, the science of looking through dead people's junk in an act of guessing how people believed, behaved and organized themselves into cultures.
Stamps are a useful way to revisit transaction taxes.
One of the more recent US transaction taxes on stocks was initiated in 1914 and then increased later in the 1930's to help pay for the Great Depression. New York state itself imposed a tax on stock transactions in 1905.
The stamps for the federal transfer tax are affixed to this document shown to the left. This documents records the sale of 33,973 shares of Stutz Motor car company. My great grandfather used to own a Stutz Bearcat, in small town Iowa.
For those interested in Philatelic fiscal self-flagellation visit this site with more tax stamps.
The 1914 US transactions tax of %0.20 stayed in force until 1966. Any good tax is food for politician zombies and won't be rescinded easily. Today's proposal would see a %0.25 tax in place. That is equivalent to $50 per $10,000 worth of shares bought and sold.
The gold bugs may want to look back at the past and have a look at the silver tax stamp to the left. A spike in gold is one thing, a sustained price level reflecting a decline in the dollar may seem like low hanging fiscal Fruit for the tax man. $3,000 gold for a sustained period could bring the label hoarder thrown at the gold owner. A gold tax would not be surprising.
In the book, The Leopard, the old prince watching the empires of feudalism falling and the new empires of industrialist Italy rise, says that, "all things must change so that they may remain the same."
When the federal transaction tax was repealed, California decided to keep it. One could easily imagine that happening again.
The current and looming fiscal challenges will most likely mean govt. self justification for new forms of taxation.
French royalty used to say the goal of taxation was to pluck as many feathers from the goose as possible with minimal honking, today one has to keep the populist pundits confused and tax indirectly and with slight of hand. a bit of stimulus here and there and then some obscure slight of hand, such as the AMT, which slowly captures everyone.
The Romans invented tax outsourcing by hiring tax farmers.
The protesting of transfer taxes has taken many forms including tea parties. One of the more passive forms of protesting the transfer tax was to affix a stamp next to the tax stamp indicating that the original stamp was affixed under protest as seen in this image. Source here.
Derivatives traders should be wary. CDSs with their huge notional amounts probably have politicians licking their lips. The CDS tax seems almost like winning the political trifecta for politicians of a certain ilk. The CDS tax arguments which I don't support or refute would read something like this:
- Large taxable notional amounts
- Slows down the mega trillion dollar derivatives machine
- Forces the more questionable players offshore
- AIG et. al retribution
- Too complicated for the general public to argue the case against
Here is an old grain futures tax stamp from the Updike grain company. Source image here.
Archeology today involves trowels, brushes and patience. The future archaeologist will probably spend time digging around server logs, which seems like less fun than looking at stamps.
The mother of all transfer taxes is the federal Value Added Tax. For those advocating a federal securities transfer/transaction tax, be careful what you wish for as precedents set can be powerful things. The US has a dangerously short debt duration and looming mandated fiscal deficits. A federal VAT gets easier to justify in DC with a AA debt rating, but that is something to be discussed in 2011...2-3% federal VAT sounds about right.
Full Disclosure:
- I am just finishing up work on High frequency trading strategy in c# with +3.0 Sharpe ratios so would suffer directly from a transaction tax.
- I would like to have seen my great grandfather riding in his Stutz Bearcat, it sounds swanky.
