We're hearing a lot abut possible new taxes in the wake of the financial crisis. There's talk about taxing banks directly and taxing bonuses at elevated rates. But the most heated discussion centers on the proposed tax on securities transactions. Nothing, I mean nothing, gets the blood of Wall Street boiling quite like this one. The industry is girding to wage this war because it will finally allow them to portray themselves as champions of Main Street; they'll argue that the tax will be borne by retail investors. And they'll be outraged! 

That's not how the tax proponents see it of course. Their intent is to tax Wall Street firms. According to one proposal, a 0.25 percent tax on the value of the shares purchased would be levied. How much would that be? A $100 stock would carry a tax of 25 cents. That doesn't sound like much, but it would add up fast, especially for high-frequency traders. Critics are out in force, noting that the "exorbitant" tax could be more than the brokers' commission. 

For many the issue will come down to the exemptions. There will have to be some. Trades in retirements accounts should be exempt, and would be in some proposals. One proposal would also exempt trades of mutual funds, pensions and retirement accounts, and trading activity of less than $100,000 a year. This would shield a lot of retail investors, leaving the brunt to be borne by hedge funds and the like, and could make it more reasonable to some in Congress. 

Unsurprisingly, the lobbying big wigs are mobilizing--the Security Traders Association, the Securities Industry and Financial Markets Association, the Investment Company Institute and the U.S. Chamber of Commerce. We have yet to hear definitively from banks, but you can guess their views. 

The bottom line is that there's a need to raise revenues. The time seems ripe to some attack banks and brokerages for this, though the opposition will be fierce. At a minimum, would it be wise to hike small fee (0.0025% percent) levied on all stock transactions to better subsidize the SEC? - Jim