A potential free ride in college
The goal of Sanders' bills is twofold. The first bill seeks to pay 100% of the undergraduate tuition fees of college students, expand work-study programs, and help reform the student loan system, which has left Americans with a whopping $1.2 trillion in loans outstanding. This crippling debt can adversely affect graduates' pocketbooks, their ability to save, and even their long-term health via stress.A college education has become all but necessary to career advancement in the U.S., as employers are looking for a more specialized workforce. As the Pew Research Center noted last year, the median salary for a full-time millennial aged 25 to 32 with a bachelor's degree or higher was $45,000 in 2012 dollars. By comparison, a high school graduate was earning a median of $28,000 for full-time work in 2012 dollars. Over a lifetime, especially given workers' ability to save and invest, the difference is night and day.If undergraduate education in the United States were free, it would put this nation on par with a number of European economies -- such as France, Germany, and the three Scandinavian countries, Norway, Sweden, and Finland -- that offer free college education to their undergrads. Presumably, it would also incentivize students to learn high-demand skill sets, which could land them high-paying jobs.
What's unique about Sanders' proposals is how the free college education for undergraduates and improved community social programs would be funded.
As it's currently written, both bills "set a nominal tax of $0.50 on every $100 of stock trades on stocks sales, and lesser amounts on transactions involving bonds, derivatives, and other financial instruments." In other words, when you sold stock, you would owe $0.50 for every $100 of stock you sold. If you owned bonds or other investment vehicles, the amount you owe would be lower, because historically, the stock market offers the best long-term growth rate, and other investment vehicles have lower historical return percentages.
Think about this for a moment. For long-term investors who own stocks for years or decades at a time, the thought of paying a meager 0.5% tax on capital gains isn't all that bad. Long-term investors are already using time to their advantage and have likely compounded their gains with the use of dividend income. For this investor, a "Robin Hood Tax" will be of little consequence.
On the flip side, Wall Street high-frequency traders, day-traders, and even select short-term investors could get absolutely clobbered by such a tax. High-frequency trading, or HFT, works by trading large sums of money, sometimes in fractions of a second, and scalping pennies to net minimal but often repeatable gains. Sometimes gains of $100-$500 can be made hundreds of times per day thanks to computer software programs, and that profit certainly adds up over time.
However, introducing a 0.5% tax on stock sales could tip the balance away from HFTs, which can disrupt markets and increase volatility. The Robin Hood Tax also adds yet another reason for short-term traders to abandon the strategy of "timing the market" -- they already have to pay higher capital gains taxes than long-term investors.
crcballer55
