Capitol Building by Andrew Malone is licensed under CC BY 2.0.

Today, Townhall published an op-ed written by ATR’s director of financial policy, Bryan Bashur. The op-ed talks about why a financial transaction tax (FTT) is terrible policy. A FTT would tax transactions of stocks, bonds, cryptocurrencies, and derivatives. This would affect anyone with a 401(k) plan, 403(b) plan, 529 plan, individual retirement account (IRA), or brokerage account. You can read the full op-ed here.

The op-ed begins by describing how a FTT will harm Americans’ retirement savings:

Implementing a FTT would decimate American workers’ nest eggs. A study by the Modern Markets Initiative (MMI) finds that a “FTT could result in lost savings of $45,000 to $65,000 over the lifetime of a 401(k) account or the equivalent of delaying the average individual’s retirement by approximately two years.” That is a significant blow to American households looking for security after retirement.

The piece also points out how the tax violates President Biden’s pledge to not raise taxes on households earning less than $400,000:

Enacting a FTT would violate President Biden’s pledge to not tax Americans making less than $400,000. Investors already have to pay an expense ratio for investing in index funds and mutual funds—adding a transaction tax would also scrape off a percentage of the returns investors would receive. The difference is an expense ratio is a fee a fund manager charges for providing the service of operating a fund, whereas a FTT takes money an investor would have earned and instead directs it to the government.

The article explains that just because Europe has largely embraced the FTT that does not mean it would be good for the U.S.:

European countries are embracing the FTT. Many countries implemented these taxes to raise revenue, but the taxes failed to raise as much as they thought it would. According to MMI, “in some countries like Italy and Sweden, the FTT only raised 3% to 15% of the annual expected revenue.” According to the Committee on Capital Markets Regulation, “FTTs would wreak havoc on financial markets and the broader macroeconomy – all without raising the expected tax revenue.”

The tax would also negatively impact 529 plans:

These plans invest in stocks and bonds, which would be affected by the FTT. In fact, the FTT “would negatively impact 529 College Savings Plan Portfolios across the country, with projected cost ranging from $2 million to $19 million for a plan portfolio with a size of $2 billion to $12 billion range, respectively.” The tax would be incredibly harmful to American families.

The FTT is a tax on all American households.