Recently on the campaign trail, Sen. Bernie Sanders, who is running in the Democratic Presidential primary, explained his plan to pay off American students’ college debt by putting a tax on securities transactions. According to Felice Maranz at Bloomberg, Sanders’ plan includes “a 0.5% tax on stock transactions, a 0.1% tax on bond trades and a .005% tax on derivatives transactions.”
Maranz continues, noting that shares of online brokers like TD Ameritrade and E*Trade fell in value after Sanders’ comments, writing:
The financial transaction tax (FTT) “boogeyman” appearing on the campaign trail is weighing on the group, Compass Point senior policy analyst Isaac Boltansky said via email. “Whether clients are interested or not in the student loan proposal, the use of the FTT as a pay-for signaled that the issue would play a meaningful role in the Democratic presidential conversation.”
A new tax would probably hurt trading volume, Bloomberg Intelligence analyst Andrew Silverman said. A financial transaction tax may “cause the asset values of publicly offered stocks, bonds and futures to decline because the tax could cause demand to decline,” Silverman said.
With twenty-five major party presidential candidates (including the President) each vying with the others to come up with plans that will set them apart from the competition, more bold proposals like Sanders’ are bound to be made. Even the threat of a new tax on an industry can hurt share prices. Investors should be paying attention to what’s going on in the presidential race.
Jeremy Jones, CFA
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