Rep. Ilhan Omar wants to tax individual stock trades to cancel all student loan debt.
Omar’s proposed “financial transaction tax” of 0.1% could raise about $1 trillion that the congresswoman said could be used to “make college free,” according to her Twitter account. This tax would apparently take effect alongside capital gains taxes, which can already claim up to 37% of a trader’s profits.
A small tax – 0.1% – on each Wall Street trade would reduce high frequency trading, a practice which drains profits from retail investors and benefits only the very rich.
We could use the close to $1 trillion it would generate to cancel all student debt and make college free. https://t.co/z4ZZo4Pdui
— Ilhan Omar (@IlhanMN) January 28, 2021
While Omar’s proposed tax seeks to penalize high-frequency traders, notably absent from her statement is any indication that she would like to see this tax confined to only institutional investors. This means the tax would apply equally to the smallest day traders and largest hedge funds.
This most recent proposal is actually more conservative than legislation she previously introduced alongside Sen. Bernie Sanders in 2019, which sought to levy a larger 0.5% tax on stock trades.
Omar’s renewed focus on taxing traders comes after a frenzied week in the stock market.
Since Jan. 11, GameStop stock ($GME) has been on a meteoric rise that saw a peak one year gain of about 8,800%. This price increase was propelled by a group of retail investors organized around a Reddit forum who decided to take long positions in $GME with the aim of raising the stock price, thus forcing hedge funds who shorted the stock to pay out their positions.
This effort was at least partly successful as one such hedge fund, Melvin Capital, suffered 53% losses ($4.5B) due to their short position in GameStop while others suffered less severe losses.
While Omar’s stock suggestions are likely to generate controversy, the recent $GME situation has created unlikely moments of unity.
Progressive Rep. Alexandria Ocasio-Cortez called for a congressional hearing to review stock broker Robinhood after it blocked investors from purchasing $GME as the security rose in value. This resulted in a moment of bipartisanship as conservative Sen. Ted Cruz replied simply: “Fully agree.”
Fully agree. 👇 https://t.co/rW38zfLYGh
— Ted Cruz (@tedcruz) January 28, 2021
Cruz and AOC may just realize their shared goal of investigating Robinhood’s actions amid the $GME rise. The U.S. Securities and Exchange Commission (SEC) signaled that it is “closely monitoring” the situation Friday. Although the commission did not name Robinhood specifically, many investors who are skeptical of the broker welcomed the news.