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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
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Experience:  10 years experience
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I need an expert on the financial segment of the economy to

Customer Question

I need an expert on the financial segment of the economy to tell me how much income a 1% sales tax on all financial paper except personal checking, savings and debit cards would bring in to the Federal Government.
That includes all special investment vehicles like CDO's, derivatives, and other banking paper, the Chicago Board of trade, the stock market, precious metals, non precious metals, agriculture futures, other futures ...
Submitted: 9 months ago.
Category: Tax
Expert:  Jason M. Tyra, CPA replied 9 months ago.

A lot.

If you just count the estimated size of the derivatives market, this would be $120,000,000,000 (on $1.2 quadrillion "face" value in derivatives outstanding).

It depends on on how you calculate the tax, though. For example, the "face" value of a derivative contract is less than the associated premium paid on the contract itself. Does the tax apply only to the original purchaser of an item subject to the tax or does it apply every time the item changes hands? Do you count commercial paper, where nothing is actually being bought or sold? For the sake of comparison, borrowed money isn't usually taxed in the US.

As you may know, a small transaction fee has been proposed by some in Congress as a tax on securities transactions to discourage the volatility associated with high speed trading. The fee would be far less than 1%, though.

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