Bloink: Of course, ordinary taxpayers have the opportunity to invest in ETFs and participate in the gains, but the tax benefits of investing in ETFs do not tend to trickle down to those taxpayers. We are talking about ordinary Americans, that is, investors who are also subject to low long-term capital gains tax rates – in some cases, even 0%. Eliminating the tax preferences would not hurt ordinary Americans who choose to invest in an ETF.
Byrne: All this proposal would do is eliminate a valuable and popular tax-efficient investment strategy that benefits all taxpayers who choose to invest in widely available ETFs. This will never pass, and it is yet another partisan attempt by Democrats to make investing in our economy less attractive at a time when we need those long-term investments the most.
Bloink: Closing the ETF tax loophole would generate the kind of revenue we need to fund our infrastructure projects, provide a long-term solution to our current inflation problem, and hold wealthy taxpayers accountable for their fair share. Most of the proposals exempt investments in retirement accounts, which is how most ordinary Americans hold their investments in ETFs in the first place. The current loophole is not something Congress ever wanted and should be closed.
Byrne: If we’re trying to encourage long-term investment and encourage people to keep their money in the markets, this type of rule is the one we want to avoid. If the proposal passes, it means people who make long-term investments in ETFs will start generating annual tax liabilities every year. This will discourage them from keeping their money in valuable investments that can provide powerful long-term gains. This law will not pass and is just bad policy overall.
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