Imagine this: free college tuition for everyone, and all we have to do is impose a tiny tax on big-money financial institutions when they buy and sell shares of stock. Maybe that sounds good on the surface, but it doesn’t pass a freshman economics class.
U.S. Senator Bernie Sanders (I-VT) is one politician who disagrees. He continues to call for what is known as a financial transaction tax (FTT) on investors in order to fund tuition-free higher education. But what Senator Sanders fails to recognize is that this tax would hurt every investor in America – including the hard-working people and savers he has spent his life advocating for.
In the words of Burton Malkiel, professor of economics at Princeton University, “Wall Street would not foot the bill for the presumed $150 billion tax. In fact, the tax would simply be added to the cost of doing business, burdening all investors, including 401(k) plans, IRAs and mutual funds.”
Unfortunately, Senator Sanders appears to be ignoring the warning of a wise market thinker. He is trying to provide middle-class and lower-income families with access to free college by taxing households with retirement investments and universities managing endowment funds.
University endowments are a collection of donations that are utilized to help fund financial aid, research and capital-intensive projects across campuses. By investing endowment funds across asset classes and markets, universities hope to realize returns that can be put toward assisting lower-income students, paying educators and supporting research.