[Correction: The article originally reported that the financial transaction tax in Warren’s proposal would be one basis point. The tax would actually be 10 basis points.]
The 401(k) sector (and financial services overall) is reacting to Friday’s release of Elizabeth Warren’s plan to provide “Medicare for All,” with concern centering on the possibility it will tax investors and therefore make it more difficult to save for retirement.
While the impact to 401(k)s savers is not directly addressed in the plan, Warren promises no new taxes on the middle class in order to pay for the audacious proposal.
However, shifting resources and the opportunity costs that result have critics skeptical of her promise.
In “Ending the Stranglehold of Health Care Costs on American Families,” she refers to the financial industry specifically, writing that, “It’s been more than ten years since the 2008 financial crisis, and while a lot of families are still dealing with the aftereffects, the financial sector is making record, eye-popping profits.”
Meanwhile, she adds the risk of another financial crisis remains unacceptably high.
A ‘small’ tax
Her answer is to impose “targeted taxes and fees on financial firms, that can generate needed revenue and also make our financial system safer and more secure.”
Her targeted taxes and fees include “a small tax on financial transactions” of 10 basis points which Warren claims would generate about $800 billion in revenue over the next ten years.
“The tax would be assessed on and collected from financial firms and would likely have little to no effect on most investors,” she argues. “Instead, according to experts, the tax could help decrease what Americans pay in fees for their investments and reduce the size of relatively unproductive parts of the financial sector.”
In an era of falling fees, Warren then suggests the opposite, calling for “a fee on big banks that encourages them to take on fewer liabilities and reduce the risk they pose to the financial system. A small fee that applies only to the forty or so largest banks in the country would generate an additional $100 billion over the next ten years—while making our financial system more safe and resilient.”