The financial transaction tax would be a major hit to pension funds, which are a major source of retirement income for our nation’s workers.
For example, an average city firemen pension fund with $345 million assets under management (AUM) would pay $429,000 in annual FTT, and an average state public pension fund with $68 billion AUM would be liable for $132 million in FTT each year.
As of March 2019, 401k plans held an estimated total of $5.7 trillion in the U.S. and represented more than 19% of the $29.1 trillion in U.S. retirement assets. This is an increase from 2010, when 401(k) assets were valued at $3.1 trillion in assets under management and represented 17% of the U.S. retirement market.
The FTT would have a negative impact on 401K and IRA holders across the country, with a projected cost of $281.00 in FTT taxes per year for an average 401k portfolio or IRA plan with $100,000. The cost of an FTT over a lifetime of a 401k account of this size would be $64,232 after 40 years.
The impact of an FTT on American savers including 401k holders has been noted to include a 3% reduction in retirement savings over a working life.
The FTT would negatively impact 529 College Savings Plan Portfolios across the country, with projected costs ranging from $2 million to $19 million for a plan portfolio with a size of $2 billion to $12 billion, respectively.
529 plans are a widely-used tool for families to save for their children’s education costs, with over 44% of parents utilizing 529 plans to help save for college. In 2018, over 13.6 million families utilized 529 tax-advantaged savings plans for educational expenses. The total assets under management in 529 plans reached $328.9 billion, according to a prior report from the College Savings Plans Network.
For a 529 Plan Portfolio with $12 billion in assets under management, the projected impact of The Inclusive Prosperity Act of 2019 is $19 million in annual FTT. In all, the impact of the proposed FTT on such a 529 plan would be equivalent to the cost of instate tuition for approximately 1,906 students per year.
University endowments offer educational institutions ongoing stability to educate generations of students, offer financial aid, and offset the rising cost of college tuition.
There is over $350 billion invested collectively in public and private university endowments, of which $163 billion is comprised of public university endowments. If an FTT was imposed, university endowments would pay at least $422 million in FTT a year, collectively.
For a single public university endowment in the “top 5” by assets under management, with $20 billion AUM, the projected cost would be $24 million, or the equivalent of 3,227 college scholarships in a given year.