Trading Tax Loathed by Street, Poll Says

NEW YORK (TheStreet) -- The very mention of a proposed trading tax can result in an otherwise tried-and-true capitalist being burned in effigy by former friends.

Still, populist rage is fueling the agenda of U.S. politicians. Whether it's the grandstanding that both Ben Bernanke and Timothy Geithner been subject to in the successive weeks, or regulators and politicians from other nations who have voiced support for the concept of a tax on trading profits, ways to exact revenge on the financial heavyweights of the world for behaving badly are a hot topic.

It's also Wall Street bonus season. No doubt, the juxtaposition of Street bonuses a quadrillion times the size of 10% of the U.S. population's monthly unemployment income is not going to engender much warmth for the Street. In light of this, Bank of America(BAC) certainly picked a good time to announce it stands ready to repay the Troubled Asset Relief Program all it owes the federal government.

Grandstanding and populist rage aside, why is the concept of a trading tax so toxic? It could mean big money for the government, for certain, with estimates that even a 0.005% tax could amount to $76 billion a year. Still, from a purely capitalist sense, a tax on anything is not allowing the invisible hand of Adam Smith to operate on the markets; that taxes are an impediment to economic growth is about as fundamental a conservative market belief as exists.

Maybe that's so, and in this case, the idea of a trader tax is mistaken if it is meant to exact revenge on the Street rather than contribute to the economy.