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A Tax on Stock Trades?

Posted by Cheryl Costa  January 7, 2010 09:05 AM

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Do you buy or sell individual stocks?  If yes, you should know that Congress is considering imposing a tax of 0.25 percent on each and every one of your transactions.  Estimates of the revenue that would be generated from taxing these transactions exceeds $10B per year.

Proponents of the tax say that the average investor won't be impacted by the tax because the first $100,000 in transactions will be exempt and mutual fund trades won't be subject to the tax.  However, what do mutual fund managers buy?  Individual stocks of course, and the fund managers would be subject to the tax.  This would make mutual funds more expensive and those costs would very definitely be borne by the average investor. 

Lawmakers are quick to point out that the tax would not be imposed on an investor's trades within retirement plans and 529 plans, but if the underlying funds in these plans are taxed, the tax eventually "floats" back to the investor. 

The tax will also be imposed on options, futures contracts and swaps although the rate on these instruments would be 0.20 percent.  Interestingly, the tax does not apply to individual bonds.

This tax is a truly horrible idea and investors shouldn't be misled by the proponents of the tax who say that only day traders and Wall Street fat cats will be impacted.

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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D. Abraham Ringer is a CERTIFIED FINANCIAL PLANNER practitioner and a Financial Adviser with Morgan Stanley Global Wealth Management in Boston. He is registered in MA, NH, NY and several other states to which his articles are directed. For more information please visit
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