Senate bill to end ETF tax break “unlikely to pass”: CIO

A Senate Democrat’s proposal to end tax relief for exchange-traded funds is “fairly unlikely to pass,” the chief investment officer and research director of ETF Trends said this week, Dave Nadig, at CNBC’s “ETF Edge”.

“I think the odds are pretty low,” Nadig said in an interview Monday. “It’s easy to look at that and say, ‘Well, my God, that’s something the rich take advantage of.’ It is in fact the small investors who benefit the most. ”

Drafted by Senate Finance Committee Chairman Ron Wyden, D-Ore., The bill suggests stopping the tax break on in-kind transactions, allowing ETF managers to sell positions without triggering capital gains taxes for end investors. It would exempt ETFs in tax-deferred retirement accounts.

“It puts an ETF and a traditional mutual fund on roughly the same footing, which means if someone has to sell inside the portfolio, there’s a taxable event,” Nadig said.

Although Wyden said the plan applies to “the wealthiest investor’s taxable accounts,” there are many ways they can get tax benefits outside of ETFs, which are “by no means” their primary means of obtaining tax benefits. do it, Nadig said.

“It’s pretty regressive and for that reason I think it’s unlikely to pass,” he said. “But the reason? To try and increase income, of course.”