Friday, November 27, 2009

Taxing shorter term gains with a 2% Surcharge.

Some thing is wrong in the process where large companies and sometimes even small traders trade same stock several times a day to gain from market variation on minuit to Minuit basis.

This excessive trading creates a market which does not build companies or reward long term investors and only benefits the manipulators and slick artists of the market.Stock markets have a purpose of capital formation for the enterprises and provide liquidity in the system.

It is about time that a third category of capital gains be created which covers options,any Gaines on investment on a period shorter than 30 days.These gains should have a surcharge of two percent on all gains.This will be reasonable tax to discourage excessive speculation.

Yesterday's article by Paul Krugman ( which i read after i started writing this blog ).He is making the argument that Hyperactivity in the markets adds to the speculation and market manipulation to the market.Paul Krugmans arguments are much better made .He as professor brings lot of historical knowledge to economics.No wonder he was awarded Nobel Prize for economics.He is one of the rare reporter and columnist who is able to cut through the fog and clarify the picture.

Hats off to Paul Krugman for promoting Liberal ideas which can promote development.He has a loud voice which has been amplified by his Nobel and NYT columns.

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