Financial Transaction Tax (FTT) - in USA

[jeremyjohnolson 19]

Is anyone worried about a Financial Transaction Tax (FTT) in the US?  To me it seems if it is passed, it would make day trading much more difficult, not impossible, but a lot more challenging than it already is, almost impossible, especially for beginners just getting started.  You would have a much higher bar to clear before even breaking even.  It would be kind of like trading a stock with a really big spread, every time you trade.  You would already be negative on your trade, pretty bad, the instant you enter it and have to make that up before even breaking even.  I think it would basically put us back to 90s, to the days of high commissions.

As far as the rate of an FTT, I have heard proposals from 0.1% to 0.5% which would be charged on both the buy and the sell side of the transaction.  That means if you buy 500 shares of a $50 stock, it has to go up to $50.10 before you even make back the FTT cost, then you still have all the same taxes and fees we already have on top of the FTT, i.e. commissions, capital gains tax, SEC fees, etc.  If the FTT rate is 0.5%, then 500 shares of a $50 stock would have to go to a whopping $50.50 before you even make back the cost of the FTT.

Also, note that even if it is a losing trade, you still have to pay the FTT.  So assuming you go long 500 shares of a $50 stock, a normally $50 loss would now be a $100 loss and a normally $50 gain would be zero, if FTT is only a "small" 0.1%.  If on the upper end of the proposals at 0.5%, a normally $50 loss would be a $300 loss and a normally $50 gain would now be a $200 loss.  You would already be negative $250 the instant you enter the trade, under an FTT of 0.5%!!!

Is anyone else worried about this?  What do you think the likelihood is of it passing?  I believe it has been talked about off and on for the past 10 years or so, at least in recent years that is, not going back to the Great Depression when they actually implemented it - I am meaning in a more modern timeframe, I think it has kind of been bounced around for about the past decade or so.  Does it seem like there might actually be the political environment to get it through now with the whole $GME/Reddit WallStreetBets craziness?

I believe that if an FTT gets passed, it would be a pretty big deal and a game changer (not in a good way) for us as day traders.  What do you all think?  Is there a silver lining here, maybe some positive thing that could come out of this?  One thought I had, and I do not think this will actually result in it being a net positive, but potentially it could weed out some High Frequency Trading by algos that might make day trading for the smaller retail trader a little bit easier, I don't know.  I am still very new to the world of trading and still trying to learn how it all works.  So someone that has been around a while might be able to shed some more light on this topic for me.  I hope somebody will chime in and let me know I have nothing to worry about and everything is going to be alright LOL😃 (nervous laugh) !!!

Edited March 6, 2021 by jeremyjohnolson

[Bailey Nevener 83]

Good evening Jeremy,

 

I am not super nervous about this passing because big money really wouldn't like it.

I really feel like the power is in the hands of the lobbyists of the High Frequency Trading firms.

Of course everything could go sideways and blow up in our faces.

If that did occur I feel it would be a serious issue towards day trading.

 

Bailey Nevener

[jeremyjohnolson 19]

12 hours ago, Bailey Nevener said:

Good evening Jeremy,

 

I am not super nervous about this passing because big money really wouldn't like it.

I really feel like the power is in the hands of the lobbyists of the High Frequency Trading firms.

Of course everything could go sideways and blow up in our faces.

If that did occur I feel it would be a serious issue towards day trading.

 

Bailey Nevener

I sure hope you are right.  I think you probably are.

[Bryan W 50]

It seems like it would hurt quite a bit... It must be remembered though, that most politicians in charge of passing something like this, are HUGE in investment trading with millions, tens of millions, or even hundreds. With that in mind, I feel like there's pretty big incentive for those politicians to keep it blocked. Guess I'd have to look at other career paths or go back to sea! 😄 I'd rather stay home, in my back bedroom.

It might sway things more towards swings...smaller positions with longer holds. 

[jeremyjohnolson 19]

49 minutes ago, Bryan W said:

It seems like it would hurt quite a bit... It must be remembered though, that most politicians in charge of passing something like this, are HUGE in investment trading with millions, tens of millions, or even hundreds. With that in mind, I feel like there's pretty big incentive for those politicians to keep it blocked. Guess I'd have to look at other career paths or go back to sea! 😄 I'd rather stay home, in my back bedroom.

It might sway things more towards swings...smaller positions with longer holds. 

I agree, the more I research into this, the less likely I think it is that it will ever actually become law.  I think the only way it would is if the Democrats had much larger majorities in both the House and the Senate than they have right now and even at that, not all Democrats are in favor of it.  Chuck Schumer, for one, is against it.

[jeremyjohnolson 19]

Apparently Senator Van Hollen introduced a new bill to implement an FTT of 0.1%.  Here is a link to him talking about it: (1210) Van Hollen Discusses Merits of Financial Transaction Tax at Banking Committee Hearing - YouTube

Hopefully it goes nowhere.  Not trying to be political, but this directly impacts day traders in a pretty major way.

Edited March 12, 2021 by jeremyjohnolson