O P I N I O N
Stand up. Speak up. It’s your turn.
Armed with our fresh New Year’s resolutions, many Granite Staters are revisiting just how hard it is to save money. We may be recovering from the holiday season’s rampant consumerism, but we should also take solace knowing that financial profligacy is not the real issue keeping us from building long-term financial security.
In fact, inflation-adjusted incomes for U.S. workers haven’t changed much since the mid-1960s. Even while enjoying record-low unemployment, we’re not seeing significant wage growth. Yet workers are increasingly on their own. Our economy has shifted from long employment tenures accompanied by generous pensions to far more precarious part-time, hourly, and contract roles in the gig economy and service sector. These positions rarely come with health benefits, let alone guaranteed retirements.
Democratic leaders have spoken compellingly about these challenges, so it’s puzzling to discover how many Presidential hopefuls would make things worse. A concept called a “financial transaction tax” (FTT) has received backing from several leading contenders for the White House, despite impacts that could make a comfortable retirement a fading hope for millions of Americans.
There’s a reason the FTT tax is often referred to as a “retirement tax.” It would put a levy on trades within the 401(k)s, 403(b)s, pension funds, and other accounts that seniors rely on. This would compromise their annual earnings and make it more difficult to cover basic living expenses.
Lost income would exacerbate the struggles of the countless seniors who never fully recovered from the Great Recession. That financial meltdown hit average investors hard and caused some older workers to be pushed out of good jobs and even the workforce as a whole. Many people labored extra years if they could, but as a group, retirees still aren’t where they hoped to be financially. We should not ask them to sacrifice more.
Unfortunately, a retirement tax could be even more problematic for workers still looking forward to their Golden Years. To understand why, consider what happens when you invest $10,000 over 20 years. With average returns, you’d wind up with about $32,000. But add an FTT tax over that period and the amount would drop $26,000. That’s a loss of $6,000, and it would apply to every $10,000 someone manages to squirrel away.
Younger employees counting on the power of compound investment returns over 25 or 35 years would see the retirement tax eat even further into expected earnings. This can do nothing but delay the day at which most Americans are financially prepared to stop working.
For all that would be asked of people aged 50 and above under an FTT tax, relatively little in the current Democratic policy landscape would help this demographic segment. Medicare for All, as one popular example, won’t improve seniors’ Medicare. It could even harm it.
Nonetheless, older Americans might take the risk on a retirement tax if we thought it would help with the big problems facing this country. But history indicates otherwise. The U.S. has had FTT taxes before but repealed them because they do more harm than good. And the Congressional Budget Office has recently opined that the Treasury would lose revenues with an FTT tax. Draining government coffers would only make it more difficult to invest in common-sense social safety net improvements many Democrats have wisely put forth.
Older Americans are looking for a lot of things in the next President. Perhaps first and foremost, however, we must seek out someone who has the courage to examine hard data without the rose-colored bifocals. Faith in the FTT tax is only an illusion. A retirement tax can’t pay for an ambitious policy agenda, and candidates of honesty and integrity should not pretend that it could.
Beg to differ? Agree to disagree? Send your thoughtful prose on topics of general interest for consideration to email@example.com, subject line: The Soapbox.
Lou D’Allesandro is a State Senator from Manchester, representing District 20.