Treasury Secretary Steven Mnuchin and key Republican lawmakers added their voices to growing concerns over the effect a potential financial transaction tax (FTT) would have on retirement savings and the U.S. economy.
In a Dec. 5 hearing before the House Financial Services Committee to review financial stability of the U.S., Republican members of the Committee along with the hearing’s lone witness, Treasury Secretary Mnuchin, expressed alarm over FTT proposals put forward by various Democratic presidential candidates and lawmakers.
“This is not a honeypot of money that just comes from heaven... The rhetoric is that it will hit only the wealthiest, but the reality is that average everyday investors – especially mutual fund investors and those saving for retirement – would be severely impacted by this nefarious tax,” the ranking Republican member of the Committee, Rep. Patrick McHenry (NC), stated at the start of the hearing.
McHenry specifically inquired with Secretary Mnuchin about a Nov. 20 letter he wrote to Mnuchin requesting a detailed study on the impact the various FTT proposals would have on everyday investors and the economy at large. As part of that review, McHenry requested that Mnuchin, in his capacity as Chair of the Financial Stability Oversight Council, study the potential loss of savings in retirement and other savings accounts, citing a CBO study finding that an FTT “would immediately lower the value of financial assets.”
In response to Rep. McHenry’s request and questioning by Rep. Ann Wagner (R-MO), Secretary Mnuchin confirmed that the Treasury Department has committed to study on an internal and inter-agency basis the impact an FTT would have on the markets and investors.
“I am very concerned that it would destroy our capital markets and American holders of mutual funds would bear the majority of the costs,” Mnuchin told Wagner. The Treasury Secretary added that an FTT could lead market participants to look for other ways to avoid the tax by moving money offshore and it would “disproportionately hurt pensions and 401(k)s and people who are saving for retirement.”
Citing a recent Vanguard study, McHenry further noted that, with an FTT in place, “a typical mutual find investor would have to work an additional two and a half years to achieve the same retirement goal.”
His letter specifically singles out presidential candidate Sen. Bernie Sanders’ (I-VT) Inclusive Prosperity Act (S. 1587), as well as the Wall Street Tax Act of 2019 (H.R. 1516) introduced by Rep. Peter DeFazio (D-OR) in the House and by Sens. Chris Van Hollen (D-MD) and Brian Schatz (D-HI) in the Senate.
Other proposals to implement an FTT have been floated during the past several weeks and months, including an FTT contained in Sen. Elizabeth Warren’s Medicare-for-All proposal.
