WASHINGTON--(BUSINESS WIRE)--Middle class Americans saving for college, retirement and other life milestones would see a backbreaking tax bite if federal proposals to tax stocks, bonds and derivatives investments are enacted. According to a 2021 study from the Modern Markets Initiative, a financial transaction tax (FTT), which has been introduced by some lawmakers but not yet embraced by President Biden’s Administration, would be nothing more than “a retirement tax” on Americans’ nest eggs and will burden savers at all income levels who invest in securities.
MMI’s latest report, A Study of the Effects of a Financial Transaction Tax on Savings and Retirement Security and Risk to Market Stability During COVID-19 Volatility, reveals that the FTT would pose a threat to the security of the retirement and lifetime savings of millions of Americans. A full version of the report can be viewed and downloaded here.
Kirsten Wegner, CEO of MMI, commented: “Our comprehensive analysis plainly displays that the so-called financial transaction tax is really a tax on the savings and retirement of average Americans. The tax, which has been touted by some in Congress as a tax on Wall Street, actually takes aim squarely at Main Street investors.”
Wegner continued: “We encourage bi-partisan support for savings and retirement for Main Street investors during these trying economic times. We invite lawmakers at the federal and state levels to learn more about the negative impact of a retirement and savings tax on Middle Class investors saving for college and retirement.”
MMI’s data exhibits that this tax on financial transactions would harm institutional investors who are responsible for the financial savings of many Americans, including pension funds and university endowments, and pooled savings vehicles such as mutual funds, index funds and ETFs which are continuously rebalanced and hit multiple times by a FTT. Ultimately, the tax would be borne by the end-user of such funds, as well as the millions of Americans invested in the markets through 401(k) plans, IRAs and 529 College Savings Plans.
Key metrics of a financial transaction tax include the following impact on American savers:
- $5 million to $19 million in annual FTT on for an average state 529 College Savings plan with $12 billion AUM, or the equivalent of a year of full in-state tuition for over 440 to 1,900 students at a public university.
- $840,000 to $24 million in annual FTT for a single public university endowment (depending on AUM), or the equivalent of nearly 3,500 college scholarships each year.
- $45,000 to $65,000 in FTT over the lifetime of a 401(k) account, or the equivalent of delaying the average individual’s retirement by approximately two years.
- Over $75 million to $100 million in annual FTT for the typical state public pension plan with approximately $2 billion to $80 billion AUM.
To learn more about the MMI methodology for economic impact projections, please refer to the MMI report which details asset class exposure, calculation methods, spread costs, turnover calculations, and other considerations related to that savings vehicle based on publicly available data.
For more information and educational resources on the retirement and savings tax, visit https://noretirementtax.org/.
About Modern Markets Initiative
The Modern Markets Initiative (MMI) is a bipartisan education and advocacy organization devoted to the role of technological innovation in creating the world’s best markets. The nonprofit was founded in 2013 by leading, quantitative trading firms whose collective role in creating market efficiency contributes to a dramatic reduction in trading costs for investors. MMI engages and educates public audiences about the value modern market professionals provide to today’s electronic marketplace.
