Another presidential candidate has a plan to tax financial transactions – including those in your 401(k).
As part of a broader financial reform plan, Bloomberg is proposing a 0.1% tax on all financial transactions to “raise revenue needed to address wealth inequality, and support other measures—such as a speed limit on trading—to curb predatory behavior and reduce the risk of destabilizing ‘flash crashes.’”
The tax of 0.1% would apply to all financial transactions, including stocks, bonds and payments on derivative contracts, the proposal notes, adding that it would be phased in gradually, starting at 0.02%, to “monitor and minimize any unintended consequences.” The proposal, however, does not appear to make any accommodations to exempt retirement savings vehicles from the tax.
Bloomberg’s proposal comes just two days after he released an ambitious retirement security proposal that calls for a “private option” 401(k) and Social Security reform, as well as resurrecting the Labor Department’s fiduciary duty rule vacated by the 5th Circuit in 2018.
The former mayor of New York City joins existing Democratic candidates Sen. Bernie Sanders (I-VT), Sen. Elizabeth Warren (D-MA), former Vice President Joe Biden and Mayor Pete Buttigieg in supporting some form of a financial transaction tax (FTT). Other candidates—including Sens. Kamala Harris (D-CA) and Kirsten Gillibrand (D-NY)—have put forward an FTT, but they have since dropped out of the race. These FTT proposals among the candidates have been floated for various reasons, from limiting alleged speculative trading to raising revenue to pay for “Medicare-for-all” and the cancelation of student loan debt.
The American Retirement Association has previously decried the proposed FTT, arguing, among other things, that such a tax is “an attack on American workers who are investing for their future in their 401(k).”
And even though studies show that such a tax would have a substantial impact on retirement savings and harm individual investors, the various Democratic candidates continue to tout these FTT proposals.
Other financial reforms in Bloomberg’s proposal include:
- restoring and strengthening the Volcker Rule;
- restoring consumer protections under the Consumer Financial Protection Bureau;
- creating a “regulatory sandbox” where startups can test concepts and by providing a regulatory framework for cryptocurrencies;
- reviving and intensifying stress tests of large financial institutions;
- empowering the Financial Stability Oversight Council (FSOC) to address any emergent threats in the financial system—including in areas such as cybersecurity and climate change;
- requiring large financial institutions to monitor their risk exposure and creating a centralized record of all transactions in the markets;
- creating a dedicated corporate crime group at the Department of Justice; and
- merging Fannie Mae and Freddie Mac into a single government-owned mortgage guarantor.
