Roger’s Rules

September 1st, 2009 6:36 am

Another stupid idea from the AFL-CIO

“Puritanism,” said H.L. Mencken, is “the haunting fear that someone, somewhere, may be happy.”

The censorious folks at the AFL-CIO feel similiarly about wealth. They are haunted by the fear that someone, somewhere may be getting rich.

Their latest plan to put a stop to the orgy of American prosperity comes to us with the aid of the AFL-CIO’s natural collaborators in wealth destruction, the Democratic Party. Remember Chief Justice Marshall’s observation that “the power to tax involves the power to destroy”? The AFL-CIO hasn’t forgotten, and neither have the Democrats.

Their latest wheeze is to tax each and every stock trade. “The nation’s largest labor union and some allied Democrats are pushing a new tax,” The Hill reports, “that would hit big investment firms such as Goldman Sachs reaping billions of dollars in profits while the rest of the economy sputters.”

Right: the bloodhounds of the Left have assiduously nosed around the U.S. economy and discovered a bit that is still profitable. Wham! We can’t have that, can we? Making money while Government Motors is in receivership.

According to Thea Lee, policy director at the AFL-CIO,

“It would have two benefits, raise a lot of revenue and discourage speculative financial activity. The big disadvantage of most taxes is that they discourage some really productive activity,” she said. “This would discourage numerous financial transactions. People flip their assets several times in an hour or a day. They make money but does it really add to the productive base of the United States?”

Got that? The labor union, with the connivance of the Democrats, their “allies,” wants to put its hand into your pocket — just a little way, though. This won’t hurt at all. Trust me.

Of course, if you’re Goldman Sachs, there might be some unpleasantness. Unlike an individual, a large investment entity might make thousands and thousands of trades. That eensy-weensy little soupçon of a tax begins to add up. Bottom line: the AFL-CIO-Democratic conglomerate has hit upon yet another way 1) to extract money from taxpayers while 2) punishing success and discouraging entrepreneurship and business innovation.

And note this: Ms. Lee asks “They make money but does it really add to the productive base of the United States?” She believes that is a rhetorical question, what the Latinists among you will recall is denominated a “num” question: a question, that is, expecting the answer “no.” But she is wrong about that. The truth is, because entities like Goldman Sachs make a lot of money they therefore “add to the productive base of the United States”–”really,” to employ Ms. Lee’s snarky adverb.

I feel embarrassed pointing out the obvious, but perhaps it is necessary–really necessary–to remind the policy director of the AFL-CIO and her Democratic allies that there is a direct causal link between the production of wealth–that’s what “making money” is, really, you know–and adding to the productive base of a country. Jobs: they depend on companies being able to afford to employ people. Your local haberdashery or grocery store or hardware emporium or automotive showroom: they depend on people having money to spend, too. Ditto the housing industry and everything else that comes with a price tag.

Wealth produces wealth. Taxes reduce wealth. Got it?

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23 Comments

1. Pajamas Media » Another Stupid Idea from the AFL-CIO:

[...] Read the rest of the story here. [...]

Sep 1, 2009 - 11:43 am 2. Calvin Ball:

Notice that this doesn’t apply to currency trades. That would have made Soro’s escapades impossible.

Sep 1, 2009 - 12:09 pm 3. David Thomson:

“Wealth produces wealth. Taxes reduce wealth. Got it?”

I completely agree. Unfortunately, the late Harvard economist John Kenneth Galbraith has dominated America’s cultural landscape. Milton Freidman and Freidrich Hayek may have ultimately earned a Nobel Prize—but the author of The Affluent Society and other such silly books captured the hearts and minds of those controlling the Democratic Party. The damage has been enormous.

Sep 1, 2009 - 1:06 pm 4. SoberHorseThief:

It’s worse than that, David; this in particular smacks strongly of that old (and ultimately blood-soaked canard) of surplus value. It is an idea put forth purely to find cause to hurt people, much like economic or social “justice.” There is no such thing as surplus value, and every time economic policy invokes such Marxian ideas people wind up getting hurt and killed.

Ideas have consequences; wicked ideas have horrible consequences.

Sep 1, 2009 - 2:22 pm 5. Moho:

Aside from being the most poorly read blogger here, do you realize how idiotic this sounds:

Dear Unions: Wealth produces wealth. Taxes reduce wealth. Got it?

…given that the wealthiest companies in America were just bailed out by the federal government to the tune of trillions? Wealth may produce wealth, but until wealth gets its head out of its ass, the government will be footing the bill whenever wealth f’s up and produces zeros. You have fewer brain cells than hair on your head.

Sep 1, 2009 - 3:10 pm 6. ic:

5. Moho: …given that the wealthiest companies in America were just bailed out by the federal government …

Please replace “govt.” with the taxpayers. The govt. produces nothing, has no money to bail anyone out. But those in control of the govt. can take over a business and give it to their cronies.

But should the govt. tax each transaction, or should it tax the profits? When GS makes billions in profits, they should be taxed. But taxing transactions means taxing you and me, those who buy a few shares in the market, those who might have loss 90% of their holdings still have to pay a tax on whatever remains.

Sep 1, 2009 - 6:16 pm 7. karin gibbons:

excuse me, could someone please explain why the AFL-CIO has a say in tax policy? thanks, i think i must have missed something!

Sep 1, 2009 - 6:26 pm 8. Rick:

Roger, I’d argue that it’s not wealth that creates wealth, as such – it’s production and productivity that create wealth (and prosperity). That doesn’t take from your larger point though, that taxes are good only for destroying wealth and prosperity. This is something that the government is only now discovering (as only experience can teach them; they know nothing of economics, statistics, basic maths, or even history that “hath shewn”). Higher taxes mean less people are going to produce the wealth that’s taxed in the first place, and tax revenues predictably drop – as even the White House has been forced to acknowledge this summer.

But hey, it’s not like Obama hadn’t made his intentions plain last year when running, admitting that he’d rather the tax rate be higher, even at the expense of revenues and growth in prosperity – punitive taxes on the wealthy and the producers are “more fair,” to use his words.

Sep 1, 2009 - 8:44 pm 9. Tom Mathews:

Dear Mr. Kimball,
You neglected to mention that Henry Mencken detested people like yourself and all of those who you represent.
Consider this Mencken quote:
“In this world of sin and sorrow there is always something to be thankful for. As for me, I rejoice that I am not a Republican.”
As for your contention that the AFL-CIO promotes “stupid” ideas, you are probably correct, at least in terms of your own twisted beliefs and rapacious agenda.
To yourself of course, it would appear stupid for any person or any organization to suggest that those wealthy free-loaders you shamelessly carry water for should be called forth to support their own fair share of the nation’s burdens along with people who actually work for a living.
The 12 million members of those many unions affiliated with the AFL-CIO are, as am myself, simple wage earners.
Federal, state and local taxes are automatically deducted each and every payday. We do not retain tax lawyers nor are we allowed daily deductions for mileage or meals or for the entertaining of business clients.
To be sure, my fellow working men and women may at times complain about the amount of taxes they are required to pay but nevertheless, nearly all of them also realize that someone has to support the day-to-day operations of our government on a domestic level and worldwide, including the military.
America’s working people, together with these same 12 million union members, are not stupid…we are fully aware of what is now commonly known to us as “corporate welfare” and further aware of these dispeakable corporate deadbeats who benefit from this perversion of the tax code.
Tom Mathews
AFL-CIO Union member

Sep 1, 2009 - 9:09 pm 10. DavidN:

I recently read that Obama was quoted as saying that he wanted to reduce Wall Street’s portion of the American economy from 33% to 20%. He seems to think that by returning to yesteryear (I’m sure he imagines he can somehow stimulate domestic manufacturing; all factories will be staffed with card-carrying Union members) he will make up for this, but I’m not sure he understands how the modern economy works or why this won’t. Also, there’s the again weird aspect of a Democrat raising taxes in order to discourage activity, and then announcing that the new tax will raise lots of money. If it’s successful in discouraging the activity, it won’t raise any; in any case, it’ll probably raise less than they think, because they tend to just multiply the number of taxable instances, transactions, whatever, by their percentage. Soon we’ll be hearing that since these guys *didn’t* pay this tax last year, that money was stolen from the American people, or some such silliness. It could have gone to save children!

Sep 1, 2009 - 11:50 pm 11. jack pearson:

Why is our union trying to tax us out of trading in the stock market in our ameritrade & scottrade accounts after we get home from work??? We’re trying to make some money for our retirement! That tax is huge! Do you realize that 1/10 of 1% means if we buy & sell 1000 shares of Walmart that we would have to pay $100.00 in taxes above our regular commission from our broker?!?!?! We can’t afford that! Lower commissions brought us into the market. Why is our union trying to kick us out of it???

Sep 2, 2009 - 6:05 am 12. Michael:

Moho, do you feel better that you have your personal attack out of your system?

Don’t these traders and investors pay income tax, at least as much as congressmen do? This is just purely an attack on small investors. If it were just to make those nasty free market bastards pay then Congress could just close a few more tax loop holes. Ah but wait, that might affect Congressmen unless they exempted themselves and conservatives are actually watching nowadays.

It is very distressing that so many are now pointing out the marxist undertones of government actions. After all, what’s wrong with “to each according to his need, from each according to his ability”, I mean besides it has never worked and never will? It makes it dam difficult to punish the successful!

I have been a union member for decades but it doesn’t blind me to the fact that unions have had a major roll in destroying their own jobs so don’t blame everything on the evil capitalists. (The ones that actually made those jobs in the first place.)

Sep 2, 2009 - 9:16 am 13. Listen up:

My mama always said it takes money to make money! She was right!

Sep 2, 2009 - 6:31 pm 14. Steynian 379 « Free Canuckistan!:

[...] KIMBALL ON UNIONS– Another stupid idea from the AFL-CIO …. [...]

Sep 2, 2009 - 6:48 pm 15. Chris:

Great idea! While we’re at it, let’s enact a tax on individuals’ union dues, to be paid by the union itself..

Sep 2, 2009 - 7:40 pm 16. myth buster:

The only thing these traders produce is market liquidity, which admittedly does have some value. I must say though, that speculation produces nothing. Long term investing creates wealth, while day trading is little more than gambling. I don’t disapprove of the idea of a transaction tax of say, $.01/share. However, I do believe it should also apply to currency and commodity trades, as well as the derivatives of all these investments. Local and state governments do the same for houses and cars (title fees and registration fees). Perhaps we could replace the income tax this way, or at least the corporate income tax.

Sep 2, 2009 - 8:41 pm 17. Brian:

“given that the wealthiest companies in America were just bailed out by the federal government to the tune of trillions? Wealth may produce wealth, but until wealth gets its head out of its ass, the government will be footing the bill whenever wealth f’s up and produces zeros. You have fewer brain cells than hair on your head.”

Thats funny… This was Obama’s plan to bail these guys out…. and now your compaining about it? I thought you supported Obama?

As far as I am concerned GM should have been allowed to fail, the banks should have failed. This is how the free market works. When you do well, you can become wealthy, when you fail you stand to lose it all. It has its own natural checks and balances… and the government should keep its hands out as much as possible.

Sep 3, 2009 - 4:56 am 18. charles becker:

Minimum annual transaction tax with one turnover per day ( 1 buy and 1 sell) and $100,000 of capital is:

$100,000 * 0.001 * 2 * 250 days = $50,000

this is 50% tax

Sep 3, 2009 - 8:19 am 19. Steve DeMarcus:

Alright any company that is hurt by this new tax if they have any AFL-CIO members that work for them should immediately start a reduction of force and start getting rid of some of these union members.

Sep 3, 2009 - 9:55 am 20. Hilary:

Yeah, wealth doesn’t happen in a vacuum. You don’t get rich unless someone else is getting poor. And fairness matters. Especially in a democracy, despite what Milton Friedman says. Why are you people so quick to defend the interests of corporations? You think you’re going to be rich someday? No wonder the middle class is disappearing. Idiots.

Sep 3, 2009 - 5:41 pm 21. Lars:

As 30year AFL-CIO member and elected officer for many of those years I have worked with many types of people. I’ve attended schools ,seminars, conventions and many alike. If I have learned one thing, maybe two it is that I can learn more by listening and asking than talking about things I know little about.

Sep 4, 2009 - 5:49 pm 22. gaetano catelli:

@Tom Mathews

re: “You neglected to mention that Henry Mencken detested people like yourself and all of those who you represent.”

and, *you* neglected to mention that Mencken also despised women and Jews (along with just about anybody else who wan’t Mencken).

Sep 4, 2009 - 6:36 pm 23. TAXPREY:

I have read more than 225 articles, blogs, forums, etc. on this transaction tax. I am worried about my retirement. I cannot believe the ignorance. It’s as though it were intentional. AFL-CIO failed to mention: Retirement calculator says just a 1% difference in annual yield will reduce your pension fund by one third over a working lifetime because of reduced compounding. You will have one third less to live on! Understand? Instead of retiring on $15K, you will live on $10K per year. The fund will pay the new tax as the manager buys or sells stock at least once per year. Bid-Ask margins will increase from 1 cent and cost you 50 cents per share as a result of most of the competitive trading activity being stopped by the tax. That’s the point, right? The 50 cent trading cost of a $25 per share stock is a 2% loss on each buy or sell that the yield of the fund will be reduced by. Brokerages will fail, less competition and much higher fees. There won’t be a break-down of costs on your statements. ALL OF THESE COSTS AND MORE WILL PASS ON TO THE RETIREE BY REDUCING THE YIELD OF THE FUND.

Nothing but LIES about billions in revenue collected from this proposed tax. The Independent Budget Office of New York City’s comprehensive study revealed that a much smaller tax on just the NYSE and AMEX exchanges would yield a NEGATIVE TAX REVENUE WITH HUNDREDS OF THOUSANDS OF JOBS LOST, most of the jobs would not be directly related to finance. Imagine millions of jobs lost if all US exchanges were taxed.

I have not read one study that finds a benefit from this antiquated tax. This tax would have done nothing to prevent this financial crisis from happening or markets from falling. There are or were about 12 countries that have this tax and they have had worse problems than the US. That is why they have lowered their transaction tax, abolished it or are considering abolishing it as they have known it suppresses revenue and causes unintended consequences often with disastrous results. Google what happened to Sweden when they tried this tax for a few years. India is considering abolishing the tax after only 5 years of poor results.

What the ? There is no relationship! Stocks and my retirement are totally unrelated to the real estate flippers, mortgage defaulters and the disastrous mortgage derivatives that were not even traded on the highly regulated exchanges. Good grief. Loons.

Don’t Taxprey On Me. There are 120 million Investor Class Voters.

Sep 15, 2009 - 6:58 am