I think this qualifies as a super low hanging fruit, but Im just a recent grad anxious to flex my R1 muscles for the first time, so if this is too basic I apologize.

Lets start with the article:

Bloomberg Asks Wall Street How It Feels About Taxing Wall Street

Wow. What a title. Populist blogs and their ilk have been getting rather popular lately, and you know the story: eloquent, long form blog posts with textbook action writing telling you why things were ACTUALLY great during the Great Leap Forward, but the corrupt banksters are holding back YOUR prosperity!

So lets get to the article itself, it comes from a source that is quite popular among the Coffee Party "Progressives^tm."

If Bloomberg were interested in views other than those of the financial industry, it might have found some people who supported the tax to provide comments for the article. Or it might have tried some basic arithmetic itself.

Scathing. Not only is Bloomberg one of those "media" corporations, they can't even do math? What a joke they must be.

Most research finds that trading is price elastic, meaning that the percentage change in trading in response to a tax is larger than the percentage increase in trading costs that result from the tax. The nonpartisan Tax Policy Center assumed an elasticity of -1.25 in its analysis of financial transactions taxes. This means that if the tax proposed by DeFazio would raise the cost of trading by 20 percent, then trading volume would decline by 1.25 times as much, or 25 percent. Investors would pay 20 percent more on each trade, but would be trading 25 percent less.

Hey, this guy knows his stuff, those are in fact words that appear in my Econ 101 textbook, and arithmetic even, you can't argue with that!

This means that their trading costs would actually fall as a result of the tax. (With trading at 75 percent of the previous level, but the per trade cost at 120 percent of the previous level, the total cost of trading would be 90 percent of the prior level.)

Wait... They would be trading at 90% of the "total cost," but at 75% of the trading volume? So their net cost would be ~20% higher per trade, but they would be making 25% fewer trades? Did he just literally multiply 1.2 by .75 and assert that means more income?

• With 100 trades of $100 and a cost of $10 per trade
• We observe a unit income of $90 per trade
• And a $9,000 total income from trading
• Now add 20% to the costs and snub the volume 25%
• With only 75 trades of $100, and a cost of $12 per trade
• We observe a unit income of $88 per trade
• And a $6,600 total income from trading

I don't have the MS Paint skills to make the graph, but I don't think it's needed here. I believe the author is trying to assert that if you have less activity, the marginally higher costs feel relatively smaller. Which is technically true save for the fact that you're now dealing with less activity and strictly higher costs.

So the math doesn't check out when you actually do it. How does the author back this up?

The only way “mom and pop” get hurt in this story is if they make money on average on their trades. That is a hard story to tell.

What.

Of course, there is someone that gets hurt by less trading—the folks who were making money on the trades. That’s right, the financial industry.

Oh. Of course.

If mom and pop are lucky and sell their stock when it is high, then some other mom and pop are unlucky and buy the stock when it is over-valued. As a general rule, trading will end up being a wash. (If we stopped trading altogether, that would be a problem, but the taxes on the table would just raise costs to where they were 10 or 20 years ago.)

This is fundamentally untrue due to market actors, as a whole, not typically engaging in buying and selling activities that actively cost them money.

Investments do not "as a general rule" "wash" in the long run, and selling a financial asset at a higher-than-purchased price is not due to someone getting hosed. The author is somehow assuming that regular traders always sell at some kind of loss, else some other trader is buying a fundamentally "overpriced" asset.

Assuming that an average trader is simply "getting lucky" by selling a stock that has gained value or is realizing gains in a portfolio is simply absurd. Even in a hypothetical situation where arbitrage is perfect, traders are still realizing less overall value from growth from the constriction in volume.

The author seems to be playing to the idea that trading is a net loss for the average trader, and thus by doing less of it, they throw less of their money away. I have to assume it is alluding to some child's view of the stock market where brokers are constantly in a circular state of offloading to each other, with all "growth" being some figment of a banker's imagination as he sits at his mahogany desk in a Wall St. office smoking a cigar. In addition, wouldn't the person getting hosed by buying the hypothetically "overvalued" stock be one of said fat cat brokers?

I also have to point out the mention of regressing trading costs by several decades is relegated to a parenthetical at the end, along with vague acknowledgment that trading has to happen. Hand waving seems to be a popular things among authors featured in Badecon.

Critique away. I aim to get better, and I feel like my Hard Science^tm is a little lightweight here.