Business law in Texas provides for a number of taxes to be levied in appropriate situations. One of these may be a financial transactions tax, which can be levied on each transaction that an investor makes in financial markets. The amount of this tax is usually not significant. However, it has still become a point of controversy.
What is the financial transactions tax?
Business transactions that are conducted on the financial market are subject to taxation. This will generally apply when the product being purchased falls under the heading of stocks, bonds or derivatives. The tax itself is quite small. It usually amounts to no more than 0.002% or $0.02 for every $1,000 that is traded.
The controversy concerning this tax is whether or not it is truly progressive. Many financial and legal experts maintain that it should be raised to a much higher rate. Some believe this figure should be as high as 0.1%. This would raise the rate of taxation to a level of roughly $1 per $1,000 traded.
Can a transactions tax impact investors?
There are also a number of experts who believe that this tax can have an adverse effect on investing. This would apply particularly to the area of transactions and litigation. If the tax were raised to 0.1%, this would result in a total of $2,000 for every $2 million worth of trades. This amount can potentially be a negative incentive for many high-level investors.
It should be noted that, if raised, the tax would be felt largely by the wealthiest 1% who would pay 40% of the total. Low-level traders, who conduct 60% of all transactions, would pay only 11%. The controversy between fairness in investing and protection for higher-level investors has yet to be resolved.