Taxation on derivatives

Discussion in 'Political Opinions & Beliefs' started by thediplomat2.0, Jul 13, 2011.

  1. thediplomat2.0

    thediplomat2.0 Banned

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    Last year, I watched an eye-opening documentary created by Charles Ferguson called Inside Job. I learned extensively about what captains of industry and pro-business leaders such as Ben Bernanke would call financial "innovation." One of the most lucrative types of financial "innovation" is derivatives.

    Derivatives are basically financial bets on a factor within the economic system. What astounds me is the amount of capital created through the derivatives business. Over it's near 20 year history as a business, derivatives have produced over 600 trillion dollars. In 2008 alone, the derivatives business gained near 200 trillion dollars. According to CNN, the average annual growth rate for the derivatives industry is around 40 percent. This is an area of the financial sector that must be regulated through our tax system.

    The top 1 percent of our population, or those who earn 1.1 million dollars or more, are usually the people that benefit from this business. Derivatives are a portion of a CEO's income that are not included in the portion of their income that is taxable.

    As a result, what I propose is that in order to generate the needed federal revenue to resolve the debt and deficit crisis, we should place a a tax on 10 percent of the annual derivatives income of the top 1 percent of our population. This tax would require a renewed focus of the CFTC and SEC on regulation of derivatives, as well as coordination with the IRS. The revenue gained from this tax would be on par with or greater than the possible tax hikes being discussed by Democrats.

    This derivatives tax would require a willingness from Larry Summers, Ben Bernanke, and others to drop their previous arguments on derivatives, and to bite their tongues.

    I know I am new to the Political Forum, so hopefully my first post was comprehensive and well thought out.
     
  2. thediplomat2.0

    thediplomat2.0 Banned

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    Any opinions?
     
  3. thediplomat2.0

    thediplomat2.0 Banned

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  4. nomoreneocons

    nomoreneocons New Member

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  5. MAcc2007

    MAcc2007 New Member

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    Yes, spend one minute and think about your numbers.
     
  6. darckriver

    darckriver New Member Past Donor

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    Yes - I watched that too. If you want to go a bit further, do a search on otc derivatives reform and check out some of the PDF papers available on the subject. Many of these contain some very informative and scholarly information on the nature, scope, and potential solutions to some of the problem areas requiring some sort of regulatory reform. Many of these problem areas still exists within this * $600 Trillion dollar - (that's Trillion, with a 'T') - global risk management market. Eye opening...

    * That $600 trillion dollar figure is the estimated total global notional value of all "bets on the table", so to speak.

    Sorce - Bank for International Settlements - OTC derivatives market activity in the second half of 2010 - Monetary and Economic Department - May 2011


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