A financial transaction tax (FTT) is a current legislative proposal in Congress that would be levied on all stock, bond and derivatives (such as futures and options) transactions through taxing the buying and selling of shares.
The tax would impact all Americans, regardless of income levels, who invest in the markets – be it directly or through their retirement accounts, such as pension plans, 401(k) plans or IRAs. As such, the FTT is becoming increasingly known for what it really is: a retirement tax that penalizes the hard-earned nest eggs of those saving for retirement.
Numerous respected organizations have validated the severe financial impact an FTT would have on typical investors who invest and save through our financial markets.
The Vanguard Group found in a study that the everyday impact of a 10-basis-point FTT would require an average investor to work nearly 2½ years longer before retiring in order to reach the same retirement savings goals achievable without the tax.
The Modern Markets Initiative, an industry trade group powered by GTS, Hudson River Trading, Tower Research Capital and Quantlab, found that the transaction tax would result in massive new fees for pension funds – amounting to billions of dollars each year in extra costs, which would come out of the pockets of retirees.
Americans for Tax Reform wrote that the FTT would have broad, negative economic effects. On a macroeconomic level, the transaction tax would increase the cost of capital and reduce productivity which would in turn harm wages and jobs. The tax would also increase market volatility as there would be fewer buyers and sellers and therefore more price spikes.