Biden Financial Transaction Tax is Misguided Policy
President Joe Biden has pledged repeatedly that, while he intends to raise taxes on wealthy individuals to fund wide-ranging infrastructure projects, he will not raise taxes on Americans with incomes of less than $400,000. But that won’t be true if Congress passes Senate Bill 817, also known as the Wall Street Tax Act of 2021.
The bill is supposed to target such people as hedge fund managers and Wall Street bankers, but its actual target would be many average Americans who depend on pension funds and 401(k) plans for their retirement and 529 education savings accounts to provide for the college expenses of their children and grandchildren.
That’s because the bill would impose a tax on financial transactions.
Every time a stock, bond or derivative would be sold, the tax would have to be paid. Retirement funds and college savings funds are traded frequently to maximize their returns.
According to a study by the Modern Markets Initiative, the average 401(k) plan could lose $65,000 in savings over a lifetime because of the proposed tax. That’s the equivalent of two years of retirement income for some people. Similarly, the study found, the average loss to a state pension plan would be about $100 million and to state college savings plans would be about $19 million.
Thus, those hit hardest by the proposed tax would be regular Americans who work hard to save for their future and their families’ future. More than half of all American households have some investments in the stock market, and they would have to pay the tax for every transaction made on their behalf.
In West Virginia, the effects of the proposed tax would be even harsher on those who depend on the more than 50 municipal pension funds for firefighters and police officers that were chronically underfunded for many years. The state and the municipalities have been working for more than a decade to build those funds back up, but Senate Bill 817 would impose additional costs on those funds and require them to have additional deposits to offset the costs of the transaction tax.
As someone who has worked with pensions publicly and privately, I know that taxing financial transactions as proposed by Senate Bill 817 would be bad policy.
West Virginia’s two senators, Joe Manchin and Shelley Moore Capito, should protect their constituents and make sure this piece of legislation is scrapped.
West Virginia Delegate Erikka Storch, R-Ohio, serves as president of the Wheeling Area Chamber of Commerce and chairwoman of the West Virginia House Pensions and Retirement Committee.