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March 1, 2001

Ripping Off America

By John A. Byrne ŘEditor

The average individual in America, quite frankly, spends more time mowing his lawn, or brushing his teeth, than in trying to understand how the country has overtaxed him. The topic can be deadly boring. America, a fun society, generally does not pay attention unless there is a novel angle of attack. Tax reductions must translate into gains that can be visualized in a society brought up on a diet of outlandish advertising claims and a media that transmits conflicting values. A politician, for example, who pledges to totally eliminate home property taxes, no matter how unrealistic that goal, would generate a bigger buzz than a rival proposing a more realistic tax reduction of 25 percent. The message: Make the numbers big. Tax rip-offs by the government do not boil the blood.

Therefore, at the outset, we wondered whether this month's cover was a worthwhile endeavor. Do institutional stock traders, by definition a large proportion of our readers, give a shilling about the most intensive efforts to stop the greatest shakedown ever on Wall Street: the tiny, practically invisible tax levied on stock sales by the Securities and Exchange Commission (1/300 of one percent of the trade value) to pay for its upkeep? Does the average trader care more about beer, football and golf - and his or her upcoming bonus - than the massive swindling of the American public by the federal government?

Here are the facts again: The SEC last year raised through so-called Section 31(a) fees, as well as other fees levied for the cost of regulation, about $2.27 billion. The agency's budget was $377 million, leaving a surplus that was passed along to the general treasury. This year looks just as promising for the agency (which in fairness, does support fee reductions). Here's what's happening: The Security Traders Association and others are pressing Congress and the Bush administration to support a bill that would reduce the fees. These fees are raising more money than was originally intended under the authorizing legislation. Gregory Bresiger, the author of the cover, picks up the story inside.

There is no doubt in our minds that traders will give a shilling this time around when presented with the latest facts. As the cover suggests it is a close shave. There is no assurance that the issue won't take some unexpected turns after our deadline passes and before the story reaches your desk just days later. The balance of power could shift in Congress with just one defection, unexpected resignation or death. The groundswell of support right now could melt away like ice-cream under a strong summer sun. Whatever happens, between our deadline and publication, the premise of this story will not change. For this is a story that must be told again and again. Investors and traders are getting ripped off. Indeed, if the effort this time does not succeed, it will probably be the last chance at reform for Section 31(a) until Congress and the White House are similarly aligned after some future elections.

There are more political matters to occupy the reader: the Rev. Jessse L. Jackson was interviewed by our reporter Sanford Wexler for his feature on minorities on Wall Street. Elsewhere, we are pleased to introduce another controversial character: Harold Bradley of American Century, who penned a provocative Buyside Viewpoint. Finally, in the coming weeks you will be able to stay closer with the soon to be launched Traders Magazine Website:

Did someone say we live in interesting times?