free college? Sure!(part 1)

Since Bernie #FeelTheBern Sanders has captivated the Democratic party I have  witnessed an ill-informed  outcry from young people, and folks who work for Universities or government agencies, that we should provide tuition-free education at all public universities in the United States. And, if you are so unlucky as to enjoy listening to the propositions of Bernie #FeelTheBern Sanders, then you probably believe this can be paid for by “Taxing Wall Street speculation!”. This idea is absurd.

First off, this idea is absurd because speculation is not properly defined. What is speculation? How is speculation different than investing? How would the All Mighty Government determine the difference between a middle aged woman trying to invest her money and a twenty-five year old stock trader? To throw one more wrench into this beautifully ill thought out idea, will I be taxed if I have my money in a 401(k) and my bank is using that money to trade? The answer: of course! The most logical way to ” tax wall street speculation” is to enact a financial transactions tax. This tax would most likely be applied indiscriminately to every transaction that takes place on a stock exchange, because trying to discern between different types of transactions would be nearly impossible. So, if your parents have a 401(k) controlled by a bank – they will be taxed for every transaction the bank makes, if your grandparents are trying to make a little money in the stock market- they will be taxed. If you want to learn how to trade stocks- you will be taxed every time you make a trade.

However, the insanity does not simply end here. Banks want to make as much profit as they can. If they are taxed for every financial trade they execute, they will most likely increase the fees they charge to their clients. Now we get higher taxes and fees. Awesome!

Wait, there is another issue! If financial transactions in the U.S. are too expensive, then people can trade on exchanges out side of the U.S., therefore rendering the U.S. no tax revenue, and destroying American stock exchanges. This exact phenomenon occurred in Sweden in the 1980s. After the Swedes enacted a mere 2% transaction tax they lost 60% of the trading volume in their major stock categories. Stock traders started trading in London to avoid Swedish taxation.

Simply put, Bernie Sanders tuition plan is ill thought out and dumb. And if implemented, would likely impact the working class, middle class, the poorest, and most inexperienced stock traders because they have less resources and information to avoid the taxes.

 

 

 

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