"Congress can raise taxes because it can persuade a sizable fraction of the populace that somebody else will pay." -- Milton FriedmanThe Congress has a new brilliant idea to make Wall Street pay for its sins. The proposed transfer tax of 0.25% for each financial transaction is being promoted as a matter of fairness. Wall Street needs to pay back all of that government largesse it has been receiving, and taxing financial transactions is perceived as the way to do it by some of our politicians in Washington. The only problem is that Wall Street doesn't pay taxes, people do. The real burden of this tax, as with any tax, will fall upon individuals who are involved in the economic activity to which the tax is applied. In the case of the transfer tax, that means anyone who buys and sells securities, either directly or indirectly, will become poorer since 0.25% of every trade would go the government. With investors already suffering from one of the worst bear markets in history, the last thing investors need is to lose even more money on each purchase and sale of securities. This tax will also discourage people from trading, and that will reduce liquidity in a market that has become increasingly volatile and illiquid. The case can be made that a reduction in speculative trading would be good for the market, but this tax is not the best way to achieve that. It would be much better to do things like enforce stricter limits on hedge fund leverage and prime broker activity or to prevent these highly leveraged public ETFs called Ultra Funds from proliferating.