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GreenTraderTax Blog
GreenTraderTax
December 2, 2012
New proposed FTT bills need to be stopped, including the French tax assault on America
By Robert A. Green, CPA
(Note to other media, tax and trading sites. We appreciate you covering this blog and our FTT petition. Thanks to Rob Booker of Traders Podcast for interviewing me on 12/7 on FTT. Listen to that podcast.)
Every user and service provider of U.S. financial exchanges needs to be aware of the harm that financial-transaction taxes (FTT) will cause. This tax will affect many groups, including retail, proprietary or hedge-fund traders; those who rely on pensions or charitable or university endowment funds; and those who work for a financial services company or exchange. Send this letter to your Congressman ASAP to protect your interests and the overall economy.
A few U.S. Congressmen are trying to include their proposed FTT bills in the fiscal-cliff negotiations. France passed an FTT and is trying to collect this tax from Americans. Join Rep. Tom Price in trying to stop the French tax assault on American investors. FTTs are snowballing in the EU, and President Obama and our Congressmen need to act now!
Please email this letter (or a revised version) to your Congressman. We need to act fast while tax talk swirls around Washington D.C. over the fiscal cliff and in 2013 with tax reform on the table.
Kindly also become a member of http://www.tradersadvocacy.org to help defend the tax and regulatory interests of traders. We have in-depth information on financial transaction taxes, including blogs, videos, podcasts and community threads.
Petition to Congress:
Dear Honorable Congressman:
As Congress and the administration consider all types of tax revenues for solving the fiscal cliff and the deficit in 2013, please don’t be tempted into considering a financial-transaction tax (FTT).
President Obama promised he would not raise taxes on the American middle class and poor, and that’s exactly what an FTT does. Instituting one is a shotgun approach that’s principally paid by the users of our financial markets. That includes all investors, retirees, charitable foundations which help the poor, and university endowments which provide scholarships and financial aid to students. Most pension funds are significantly underfunded, and those funds will have trouble catching up to where they need to be to pay retirees if an FTT is allowed to significantly affect their portfolios. Taxpayers will have to make up the difference.
For these very reasons, President Obama and Secretary Geithner denounced FTTs many times at the G-8 and G-20. President Obama has a better approach on taxing banks in his annual budget: instituting a “financial crisis responsibility fee” only charged to big banks on their liabilities (risk capital). President Obama expressed displeasure with Rep. Peter DeFazio for continuing to push his FTT bills in Congress with little sponsorship.
Congress is focused on raising tax revenue from the rich, but not from the middle class and poor. The Affordable Care Act starts a new Medicare 3.8% tax on Jan. 1 on the upper-income group’s unearned income, principally investment income. With Bush-era tax rates expiring on the upper income at year-end, capital gains and dividend tax rates are headed higher for them, too. They’re already being tapped for tax hikes on their investments.
Tax banks directly and target the upper income if you think that’s fair, but it’s unfair to use FTT to raise taxes on middle-class investors, retirement funds, charities, and university endowment funds. Don’t buck President Obama on this.
Say no to FTT bills from Rep. Keith Ellison (D-Minn), Rep. Peter DeFazio (D-OR) and Sen. Tom Harkin (D-Iowa). Congressional leaders dismissed pro-FTT bills to date, not showing them the light of day in Congress. But in negotiating the fiscal cliff deal before year-end, FTT advocates are trying to sneak one back on the table. Advocates argue it would be a tiny tax on each transaction, but it’s huge to active traders in cumulative — it could put some very active traders, including some market makers out of business. In May 2010, market makers stepped away from the markets and that contributed to the flash crash. Investors will lose a significant portion of their portfolio capital over time and it will rebalance their risk premium, further dampening investment.
France adopted a FTT recently - 0.2% on securities and less on derivatives - and it now includes American Depository Receipts (ADRs) of French equities trading on U.S. exchanges. This means for Americans who buy and sell French ADRs on U.S. exchanges or globally, the exchange is supposed to withhold FTT excise taxes and remit that tax revenue to the government of France. While President Obama hopefully can keep his pledge to protect middle class Americans from tax hikes, without further tools from Congress, he will be unable to block the French tax assault. This reminds me of the British slapping Americans with stamp duty taxes which led to the American Revolution. Congress must fix this fast!
Please support Rep. Tom Price’s Nov. 30 bill to enable the U.S. Treasury to block this French tax attack in America. It’s a slap in the face of the (French-gifted) Statue of Liberty. Visit http://tomprice.house.gov/press-release/price-introduces-bill-opposing-financial-transaction-tax.
France and Germany influenced nine other EU members to adopt a similar FTT plan. After the UK, Sweden and several other EU members said no, they used the EU’s minority approach “enhanced cooperation” (EC) procedure. The crucial upcoming QMV (qualified majority voting) round of EC can defeat FTT EC-11, and that vote is extremely close.
The UK and Sweden are very against this EU FTT since it mostly falls on investors using London’s dominant exchanges. If the UK is very against it, the U.S. should be too, since the U.S. also has the world’s largest financial exchanges channeling investors from around the world, and stands to lose the most. Are you ready to allow the U.S. to become a minor player in financial services and cede financial industry jobs, payroll and income taxes to Asia on your watch? Sweden tried an FTT in the early 1990s and it decimated Swedish and Finnish banks overnight with financial transactions, along with banks and jobs fleeing to London. While Paris and Berlin may be willing to take this gamble as part of their effort to federalize the EU, London, New York and Chicago can’t afford this great risk. We have different interests to protect. Germany may slow this down to 2016, but France is pushing ahead and enforcing this tax on French ADRs in the U.S. now.
Rep. Price says in his press release: “Paying taxes to other countries is a bad idea – and we need a law to stop it! This financial transaction tax would harm small businesses and investors while damaging American entrepreneurs’ ability to compete in a competitive global environment. France and other European Union nations want to charge more taxes on financial transactions, ignoring the fact that small investors will be forced out of capital markets. This move would impede financial markets efficiency, decrease liquidity, distort and discriminate within markets, and raise costs all at a time when what our economy desperately needs is more private capital investment in growth and job creation. I urge my colleagues to act on behalf of American entrepreneurs, investors and job creators by joining this effort to preempt the imposition of any form of a financial transaction tax on American markets.”
To learn why a diverse group of people oppose the FTT, please read “Straight talk about the FTT” at: http://www.financialtransactiontaxes.com. (This includes more than 40 references with research from experts around the world.)
The goal of tax discussions is to raise revenue in a productive and fair fashion. An FTT fails this test. It falls on the middle class, and the rich can navigate around it by using markets that don’t charge one. President Obama, Speaker Boehner and the other Congressional leaders have enough on their plate right now with the fiscal cliff. It’s a bad idea to throw a major monkey wrench like an FTT into the mix, after President Obama and the other leaders already took it off the table. We can’t negotiate backwards.
Many leading economists, big-four accounting firms, law firms and government bodies have studied FTT and they concluded that revenue from an FTT would likely be more than offset by lost tax revenues related to job losses (payroll and income taxes), capital losses rather than capital gains taxes, and net operating loss tax refunds rather than business income taxes.
In the end, a FTT is a punitive attack against free-market capitalism. Why play politics and seek revenge, when we have an economy to fix and jobs to create?
Thank you for your cooperation and caring for your constituents’ needs.
Sincerely,
Dangerous Precedents And Implications For Greece's Extreme Politics
By Robert A. Green, CPA
Forbes blog version: Dangerous Precedents And Implications For Greece's Extreme Politics.
Excerpt:
One measure I follow closely is a universal financial-transaction tax (FTT). I consider this a proposal from the far left with little to no economic justification. FTTs will hurt growth, lead to contraction and shrink business, finance, jobs and tax revenues. It’s looting from the far left to pay for their excessive social causes.
If I’m right, these dangerous politics hint at the euro dropping against the other major currencies and more problems for European banks and industrial concerns. December 9, 2011
While Europe Slides, Germany Plays Hardball On Financial Transaction Tax
By Robert A. Green, CPA. Blog Notes About Politics From Robert Green.
Green's Forbes blog version. October 5, 2011
The Financial Transaction Tax Is Bad Business For Europe
By Robert A. Green, CPA
Green's Forbes blog version.
A proposal for a financial-transactions tax (FTT) is now entrenched in the European Union, with proponents facing off against opponents. Debating points have been made over and over and the respective parties agree to disagree. It’s now up to power politics and a tug of war.
In one corner, the continentals and EU-federalists, who are in control of the agenda in Brussels, are pushing through their FTT proposal, despite efforts to block it from wayward Brits, Swedes and the Netherlands.
The Brits may not be able to stop FTT in the EU
In the EU, while it takes a unanimous vote to pass a new tax regime like a FTT, Brits, Swedes and the Netherlands may not be able to block this FTT proposal. Why not?
A British member of the European Parliament warned the Brits that EU officials were considering ways to negate their veto by finding a clever path to passage. Value-added taxes (VAT), which are pervasive in the EU, don’t require unanimous ratification by EU members, all that is needed is a simple majority vote. EU officials may re-name FTT as a VAT on financial-transactions. In fact, some proponents compared FTT to VAT when they made their arguments for passage in the first place.
FTT is meat for the angry lions
French President Nicolas Sarkozy and German Chancellor Angela Merkel, both center-right continental leaders, each face strong political pressure from their left, who demand even more onerous actions against the financial services industries. Sarkozy and Merkel appear to be feeding FTT meat to the angry lion, as they and their parties are both behind in the polls.
Will Wall Street protestors carry the FTT flag?
Back on the U.S. side of the pond, FTT proponents are handing protesters marching on Wall Street a new FTT flag to carry. Celebrities on the left, including Michael Moore and Susan Sarandon are being joined by FTT-advocate groups including nurses, unions and Robin Hood Tax campaigners. Protests are gathering force, and media coverage.
FTT is being dusted off again in Congress
FTT-advocates in Congress are quickly dusting off their failed FTT bills from 2009 and 2010. Congressman Peter DeFazio (D-OR) and Senator Tom Harkin (D-Iowa) are readying new EU-inspired FTT bills for the House and Senate, respectively, just in time for the upcoming November G-20 meeting in Cannes France.
Finance industry groups have all weighed-in vigorously against FTT over the past few months, as FTT clouds grew darker in Europe.
U.S. Treasury Secretary Geithner and the Canadian finance minister have repeatedly reminded EU finance ministers the U.S. and Canada will not pass a FTT, and they will block it in the G-20 too. FTT pushers know their biggest weakness is not passing it in the entire G-20 and worldwide too, because people will find a way to avoid this onerous tax.
Even with these objections, the EU is crafting their FTT to be as far reaching as possible. They will try to block people from finding loopholes to avoid the tax.
Power politics and the tug of tax war
The FTT tax battle in the EU reminds me of tax wars in the U.S. now. There is no more tax debate. In the U.S., Democrats want tax hikes, and Republicans want to block tax hikes. Tax reform that generates growth is one item where there is common ground. FTT is certainly not tax reform and it kills growth and jobs for sure, so FTT is not on common ground.
We are left with a tug of war and power politics over FTT. In fact, it may be more about EU power politics – France-Germany-Brussels federalists versus the independents – than the idea of FTT in the first place. Conservative Brits are convinced that the French and Germans want to rein in their power base in financial services, as the Brits say almost 80% of EU financial transactions are currently executed in London.
The tax would be harmful for all of Europe’s big banks like the U.K.’s Barclays, Germany’s Deutsche Bank, and the French trio of BNP Paribas, Societe Generale and Credit Agricole.
FTT is clearly harmful, so power politics may be a better explanation of why they would consider such a damaging proposal, especially during a period of great distress in EU financial markets.
Republicans will certainly block FTT in the U.S., even though they don’t want to be perceived as being defenders of Wall Street. Secretary Geithner keeps reminding all that FTT hurts retail investors, pension funds, farmers and hedgers, more than banks.
Traders should start expressing themselves in the financial markets rather than just media comment boards, and petitions sent to elected officials. The time for debate is over and it’s time for some power politics of our own. Boycott French and German financial markets, trading instruments, the euro and debt instruments. Don’t speculate on PIIGS debt or provide liquidity in Europe when they need it most. Teach them a trading business lesson 101, the value of market-makers, liquidity providers and speculators. They won’t value your role until you leave the negotiating trading-table.
Robert A. Green, CEO
GreenTraderTax Traders Association.
October 3, 2011
Financial Transaction Tax Won't Help Europe Get Back On Track
By Robert A. Green, CPA
Green's Forbes blog version.
The financial news in Europe is doom and gloom these days, with Greece headed for default. EU bailout fire trucks are being driven by auditors rather than firemen, and the fire trucks must stop off in each European capital to pick up another fireman first. Will the Greece house burn down before they arrive? Probably.
One fire-chief, EC president Jose Manuel Barroso wants to collect fire service fees (FTT) even before putting out the fire. Per tax publisher RIA, “European Commission proposes tax on financial transactions: The European Commission, September 28, formally adopted a proposal for a bloc-wide financial transaction tax (FTT) that would be levied on all transactions between financial institutions that involve financial instruments where at least one party to the transaction is located in the EU.
Under the proposal, unveiled by EC president Jose Manuel Barroso, the FTT would be imposed on the exchange of shares and bonds at a rate not lower than 0.1 percent and on derivative contracts, at a rate not lower than 0.01 percent. Member States could elect to impose the FTT at higher rates.
An accompanying press release said that the FTT could generate EUR 57 billion per year (USD 77 billion), which the Commission proposed would come into effect on January 1, 2014. “It is time for the financial sector to make a contribution back to society,” Barroso said, suggesting that the imposition of the tax would be fair in light of EUR 4.6 trillion that taxpayers were required to provide to help banks through the recent financial crisis.”
If Europe can hold it together with the Greece and PIIGS fiscal-train wreck, then Franco-German-Brussels EU federalists may get their FTT in the euro-zone or entire EU-wide. They need an EU tax to solidify and pay for an EU-fiscal union. If German taxpayers have to reluctantly pay for Greece’s cheating and over-spending, then German political officials absolutely demand control as bankers to Europe. For some, that requires a fiscal union and EU treaty amendments accordingly.
Franco-German-Brussels political leaders clearly don’t like traders – short-seller gangs – and consider them dangerous and socially useless. Germans even called traders psychopaths recently in Der Spiegel. They will continue short-selling bans, push for FTT and harsher regulations on banks and trading.
Trading and banks are valued in countries where these activities are huge contributors to the economy, jobs, taxes and culture. Even though ex-UK PM Gordon Brown (Labor) first pushed for an FTT in the EU and G-20 a few years back, a new Tory-PM Cameron-led UK is dead set against FTT and bashing banks and traders. Even UK Labor may come to their senses and realize that FTT could sink the London economy and then the entire UK. The U.S., Canada and Netherlands also value financial entrepreneurialism conducted by banks and traders and they won’t allow FTT.
Thankfully, most people realize that FTT is mutual destruction like with nuclear bombs – it could cause financial market destruction. You need mutual deterrence, so no one can do FTT unless everyone does it. FTT is so destructive, bankers, traders and investors will find countries to avoid it.
Back to on the other hand, if Europe can’t hold their fiscal-train wreck together – the likely scenario – train conductor Barroso will drive off a cliff and crash by taking the FTT route. Barroso and crew think FTT is a shining light of safety, but it’s a mirage and lure to financial market and economic destruction.
Franco-German-Brussels dictocrats have gone too far. They are the greedy ones trying to pick the pockets of bankers and traders. And feigning for the world’s poor is cruel, when they will pocket FTT monies for their own fat-cat government over-spending ways and spend little on the poor.
The FTT nuclear option will be their death Nell. It shows outrageous desperation and it’s a sign they are not holding their EU scheme together.