As the final month of President Obama’s first year in the White House approaches, he can look back on the following accomplishments:

Even before he was sworn in, Obama pushed Bank Bailout II through to the tune of $350 billion. Three days after taking the oath, he reversed his predecessor’s denial of federal funding of abortion overseas at a cost of millions of dollars and millions of unborn children. A few days later, he adopted California’s vehicle standards. A couple of weeks after that, the rookie president signed the $787 billion stimulus bill. Ten days later, Obama reversed George W. Bush’s policy of restricting federal funding for fetal tissue stem-cell research. Next, the president made GM and Chrysler wards of the federal government, pouring billions of dollars into the two automakers. That was followed by the $3 billion Cash for Clunkers program. Now Obama is on the cup of getting his ObamaCare scheme through the Congress at a cost of $6 trillion, says the Cato Institute. Waiting in the wings is Cap and Trade, as well as a host of other green energy initiatives and even more creative ways to spend money the federal treasury doesn’t have.

So how does he expect to pay for all of the above? If you pay taxes, you will soon find out. Despite Obama’s head fake of a middle-class tax cut, all taxpayers will soon be feeling the pain. The math is not all that complicated. The simple fact is that upper-income people cannot possibly finance all of the president’s Big Government adventures in spending, and the lower-income folks don’t pay taxes. That leaves the great middle-income majority of Americans upon whose backs the burden will fall.

Consider the so-called Wall Street Tax. The label is a misnomer, because it is a tax on anyone who buys and sells securities rather than on Wall Street brokers. Obama very much wants to implement this tax, and he has the support of his liberal economists and many congressional Democrats. According to The Market Oracle, here’s how the prosposed tax will work:

The tax seeks to raise $100 to $150 billion by taxing the value of every financial trade. The rate on stocks would be 0.25 percent. That does not sound like much, but it’s actually huge compared to what investors pay today when they transact. The brokerage cost of transacting is as little as $7 for a $10,000 or a $100,000 or even a $1,000,000 transaction. That’s 0.07 percent, or 0.007 percent, or 0.0007 percent, respectively. The transactions tax would be $25 or $250 or $2,500 on these transactions, respectively. That’s $25 added to $7, $250 added to $7, and $2,500 added to $7.

Due to the quirks of influence-peddling, the proposed tax would be 0.02 percent on options, futures, and other derivatives.

In the 1960s it was quite costly to transact in stocks. Commissions are part of those costs, and they were 1 percent or so. After a few decades of hard work, the industry got the costs down considerably. A well-known broker charges $7 a trade in any size and provides a more than satisfactory complement of other services. If a 0.25 percent tax goes in, the cost of a $10,000 trade becomes $32. The tax is 3.57 times the brokerage cost of $7. This is an excise tax of 357 percent on this size trade. For a $100,000 trade, the cost is $257. The tax is 35.7 times the cost of $7. The excise tax rate is 3,570 percent.

When corporate taxes finally become too restrictive, companies move abroad to countries which have lower rates. Traders won’t be able to do that, because the proposed legislation blocks the escape route by taxing American investors who trade overseas.

It doesn’t take a market maven to figure out that such a tax will discourage short-term trading. So with fewer transactions occuring, revenues from the tax will not meet the expectations of those geniuses who conjured it up. And when the feds can’t can’t get the money they want from investors on stock trades, they will simply find other ways to tax the rich. When the job creators have to pay higher taxes, they create fewer jobs, so don’t expect the unemployment rate to fall back into the single digits anytime soon.

And when the statists have soaked the rich until they can’t be soaked any more, their hungry eyes will turn to the only other group which still pays taxes — the middle class. If 2009 was the Year Of The Federal Dragon, then 2010 will surely be the Year of The Tax Collector.

- JP

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