The transaction tax could in fact offer a small benefit to Main Street investors that its opponents overlook: creating a financial incentive to promote better investment choices. While the costs would be borne in some measure by all mutual funds, actively managed funds, which are more profitable than index funds while generally underperforming them, would pay more simply because they tend to trade more.

George Sauter, chief investment officer of Vanguard Group, staunchly opposes the transaction tax, believing it would raise trading costs and fail to reign in Wall Street excesses, but says "it absolutely works to the disadvantage of a fund manager that has high, even moderate, turnover."

While Sauter thinks the tax is a mistake, resisting the urge to trade is a value Vanguard has long promoted. "We think investors should absolutely buy and hold," he says. "When they trade it tends to be at the wrong time. People make knee-jerk reactions."

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