Another presidential candidate has proposed to pay for a campaign promise with a tax on retirement savings.
U.S. senator and presidential candidate Kamala Harris (D-CA) announced July 29 that she would propose a financial transactions tax to pay for her “Medicare-for-all” proposal – specifically to tax stock trades at 0.2%, bond trades at 0.1%, and derivative transactions at 0.002%. And yes, that’s twice the rate that has been proposed by other presidential aspirants.
Harris claims to raise “well over $2 trillion” over a 10-year period to pay for her proposal through a couple of measures, including a financial transactions tax on stock and bond trading, which – though it’s described as directed at “investors and big banks” – would also include the “investors” called American retirement savers and the hard-earned money set aside in their 401(k)s, IRAs and pensions.
Nor is Harris the first presidential aspirant to seek to pay for her proposal with a sweeping tax on investment transactions with no apparent exception for retirement accounts. Earlier this year Sen. Bernie Sanders (I-VT) cosponsored the Inclusive Prosperity Act of 2019, which claimed to generate up to $2.4 trillion in “public revenue from wealthy investors” to help pay for a program that would underwrite forgiveness of student loan debt.
Sen. Kristen Gillibrand (D-NY) was a cosponsor of the Wall Street Tax Act, which purports to raise some $755 billion over a decade to help pay for infrastructure improvements – again by including the stocks and bonds held within the trillions of dollars of retirement savings invested every payday in mutual funds and collective investment trusts in the pensions and 401(k)s of middle-income Americans.
As we have previously mentioned, these incredibly misguided proposals apply to all transactions relating to retirement plans – 401(k)s, DB plans, and even those significantly underfunded union multiemployer plans. With 401(k)s it applies to every contribution, every rebalance, the internal transactions when active mutual funds are managed, and so on.
With the Sanders proposal, the Investment Company Institute estimated it would increase equity mutual fund fees by 30%. For the average target date fund, that’s an increase of 20 basis points. Since the Harris proposal doubles the one in the Sanders proposal, it might increase the average target date fund fee by as much as 40 basis points. Are you kidding me?!
These candidates need to stop using Americans retirement savings as a piggybank for their proposals.