H R 4191 A NEW TAX ON THE LITTLE GUY
On December 3, 2009 Peter De Fazio (D-OR) introduced H R 4191 in the House of Representatives. This legislation entitled â€œLet Wall Street Pay For The Restoration Of Main Streetâ€ seeks to impose a tax on all stock trades in excess of an aggregate of $100,000 in a year. On first glance, this legislation conveys the image of Wall Street paying. But, that is a giant illusion.
This proposed legislation, like so much legislation that comes out of Congress, starts out with a noble purpose but ends up hurting those it is trying to help. Think about it â€“ all mutual funds, where many investors have at least a portion of their investments and maybe all of their pension fund investments, would be especially hard hit. Also hit would be managed fiduciary accounts where many pension funds and individual accounts are invested. A threshold of $100,000 in trades is very small and would hit small investors and not just the wealthy investment banks. Finally, the low threshold would hit estates liquidating portfolios before distribution to heirs. None of this sounds like Wall Street paying for the Restoration of Main Street. It is the individual investor paying.
If the proposed legislation were confined to a tax on trades in the trading accounts of banks, investment banks and professional traders only and clearly exempted the trades that would directly impact individual investors, then the legislation might have some merit. Everyone has noticed the recent, monumental trading profits earned by major banks and investment banks that will result in gigantic bonus payouts to employees. Yes, those trading accounts will be taxed along with the mutual funds and managed accounts but it is doubtful that anyone would pay much attention or even care if it were truly a tax impacting only banks and investment banks provided the definition of a â€œprofessional traderâ€ was someone transacting greater than $1,000,000 in trades in a year. But, even that would have to have an exemption for estates liquidating its assets.
Let your Congressman know what you think.