President proposes tax provision

President Barack Obama proposed an addition to the tax code in his State of the Union, specifically a rule that would require millionaire households to pay at least a 30 percent tax rate.

This would be assessed as a surcharge on those in the income bracket whose effective tax rates fell below 30 percent to bring their taxation up to that level. This measure could have less of an impact on day traders than other proposals that have been made seeking to address perceived income inequality and flaws in the tax code.

While those with incomes above the threshold could be affected significantly, any with incomes that came to less than $1 million annually should not experience any difference under the provision as it has been described.

However, according to the Wall Street Journal, the concept of such a surcharge is rooted in mistaken or incomplete ideas of how the current tax code functions. According to the source, when calculating the effective taxes on the wealthiest Americans and taking into account corporate and other taxes, their tax rate is close to 30 percent.

WSJ also notes that part of the reason the capital gains tax rate has been set lower than the income tax rate is to compensate investors for the fact that their profits are taxed at the corporate level first, whereas income is only taxed once.

For day traders, the shift from proposals to raise the capital gains tax rate or impose a tax on financial transactions to the current idea represents a beneficial one. It would only apply under some circumstances, rather than making all trades more expensive.