In the name of “doing something,” politicians once again seek to abuse the tax code to achieve radical policy agenda items. Last week, it was Sens. Sanders and Wyden seeking a backdoor minimum wage hike when the Senate parliamentarian didn’t give them their way on a $15 federal minimum wage. This go ‘round, progressives are looking to a blanket “financial transaction tax” to supposedly “rein in” Wall Street hedge funds, at the expense of ordinary Americans’ savings and investment.
However, another week in Washington means another week that politicians on both sides of the aisle misunderstand markets, whether intentionally or unintentionally, and we find them using the hot-button issue of the day to push their agenda. This is an agenda that, across the board, grows the size and scope of government at the expense of the people. Slapping on a new tax to engineer individual actors’ behavior — businesses, individuals, or other entities alike — is one of many frequently turned to tactics.
Of course, such Trojan Horses are perpetually sold as being in the best interest of the public, or even -- as in the case of Democrats’ abysmal H.R. 1 legislation in Congress -- “For the People,” as they had the audacity to title that bill. Whether in the marketplace of ideas, or the financial market itself, politicians’ constant need to “do something” in response to any sub-ideal situation in our country generates toxic policy after toxic policy.
The recent GameStop trading controversy, wherein the “little guy” retail traders on Robinhood and the “big, bad” hedge fund managers on Wall Street found themselves at odds, naturally found all parties involved in front of the court of Congress to “do something.” When given the opportunity, it’s no surprise that regulation-happy leftists who have had it out for investment for decades, came forth with their latest excuses to pull out their progressive, market-devastating tax agenda, this time pushing for a “financial transaction tax” (FTT).
This proposal is exactly what it sounds like -- a tax levied on all financial transactions, whether it be buying and selling of stocks, bonds, or other financial instruments. In other words, a tax on all investment.
While this Warren-Sanders-esque proposal, pushed by the likes of Squad member Rep. Rashida Tlaib (D-Mich.), ostensibly is meant to target the “big, bad” hedge funds, it — like most other government programs — would most significantly harm those it purports to help. In the case of the FTT, it should be clear to those who understand markets that this proposal is nothing more than a tax on investment. That is, the very investment that is the true driver of all economic growth, that allows Americans to save for their retirement or their children, and that opens doors for ordinary citizens far from Wall Street to put their money to work.
Each and every time politicians seek to regulate markets, it points fingers at purportedly “bad actors,” while in practice targeting with their policies the majority of Americans. After all, more than half of Americans invest in the stock market. A tax on transactions is a tax on smart financial investment. Even, or perhaps especially, a FTT would devastate the savings of even those who invest passively, such as pension-holders, whose pensions rely on frequent trades.
The case of the financial transaction tax is a particularly egregious one, and advocates of sane policy-making and economic prosperity for Americans should speak loudly against efforts and excuses to implement one. It is nonsensical and exceedingly ignorant to vilify those who dare to grow their wealth, at all times. But, this is particularly true at a time where government has stripped wealth from so many Americans — by COVID-19 lockdowns, systematic dollar devaluation, and continued rampant overregulation — at the hands of those who care about their power the most, and the prosperity of Americans the least.