I strongly advocate for a tax on stock profits, beyond just the 1% transaction tax that has been proposed. What I propose is in addition to that a tax based on the length of time you've owned the stock such that the shorter the period you’ve held the stock, the higher the tax would be, eventually eventually reducing down to the flat 1% base transaction tax after a period of a few years.
Follow me below the fold for a rough graph and explanation.
It’d be defined as a curve, so the shortest transactions would be taxed very highly, especially for stocks held for minutes or days, whereas it may drop to half of that within a week, a quarter within a few months, etc. It’d heavily penalize the kind of rapid electronic trading tat has repeatedly tanked Wall Street due to computer algorithms generating feedback loops, helping to promote stability in the market through longer ownership. By the same token, it’d also encourage people to invest more long-term and give them a greater incentive to advise for the longer term viability of companies rather than just looking to the next earnings report.
The idea is generally to get stock ownership and the resultant pressure on corporate boards back into the hands of the mainstream middle class investor and to strongly disincentivize the kinds of short-term-focused activities and pressures that are so destructive to our economy. Take the revenue from the tax and put it directly into trying to rebuild small businesses and bolster the middle class - the very people who are more inclined to invest long-term.
I don't believe a simple flat transaction tax, while likely useful for tamping down high frequency trading, will really solve the issue of myopia on wall street. The idea I've presented here is directly intended to address that. If you sell the tax a few months after you bought it for a profit, you won't see nearly as much of that profit as if you'd made the same profit over a couple of years. For very short term trades, once you add in the transaction tax when you bought it, you'd actually be at a net loss.