Archive for the ‘Hedge Funds’ Category

A Rational Objection to the Trader Tax from Eric Jackson

November 27, 2009

Traders around the country are erupting in furor over Jim Cramer’s unfortunate comments in support of the proposed Trader Tax.  Speaking on CNBC in his regular shoot-from-the-hip slot, Cramer basically said what amounted to “why not?” when asked about the Democrats’ backward idea to extract a percentage of every transaction on the markets.

I read his clarification on TheStreet.com this morning, and frankly, it was weak…something about how a Trader Tax would help bring jobs back or whatever, completely absurd.  I got the impression that he wished he hadn’t said anything on the subject to begin with and wished he could back off of his original support for it.  Oh well.

In the meantime, Eric Jackson, an activist investor, contributor to TheStreet.com and the voice of Breakout Performance, posted a very well-written look at what the consequences of a Trader Tax may mean here in the US:

While I support Cramer’s interest in seeing job creation flourish in America, I completely disagree that the “trader tax” will accomplish this aim. To the contrary, I think allowing such a tax to take root here would accomplish just the opposite. In my view, such a tax would encourage large amounts of capital to relocate outside of America, jobs would be lost (not gained) and total government tax revenue would likely go down.

For a preview of what could happen in the U.S. if this trader tax was imposed, look at Britain. At the moment, the U.K. is in even worse fiscal shape than the United States. Because of that, its Labour government recently introduced additional taxes that specifically target hedge funds’ trading profits. Government bureaucrats assumed this was an easy way of generating tax revenue. What they failed to appreciate is that capital has never been more fungible than in today’s global market.

London-based hedge funds immediately announced they were relocating to Switzerland in droves, where they would face none of the new taxes levied in the U.K. With those funds go certain administrative and back-office jobs. But more important, ask London bankers how they feel about losing the many profitable revenue streams attributable to doing business with hedge funds that will now be sent to Swiss banks.

Read the rest:

Trading Tax Stiffs the Little Guy (BreakoutPerformance)

Read Also:

Cramer vs. Furor  (NYP)

Chuck Schumer Opposes the Trader  (TRB)