Senator Bernie Sanders has sponsored S.805, the Inclusive Prosperity Act of 2017. The intent of the bill is to ensure that Wall Street pays their “fair share” to support the U.S. Middle Class. Sanders’ Bill would “impose a tax on certain (nearly all!) trading transactions to invest in our families and communities, improve our infrastructure and our environment strengthen our financial security, expand opportunity and reduce market volatility.” Wow, that’s a lot in one piece of legislation.

Among the plethora of reasons cited for this legislation, Congress finds:

“The global financial crisis was caused by financial firms taking great financial risks without disclosing those risks to their investors or their regulators, and by regulatory failures to adequately police the financial services markets for crime, unfair or deceptive practices, fraud, lack of transparency, and mismanagement.”

Furthermore, “nurses, teachers, public safety officers, and other public sector workers have faced drastic funding cuts, harming our long-term public safety and prospects for economic growth.”

This last point is very interesting because the very people this bill is intended to help may, in fact, get hurt. How? According to Kirsten Wegner, CEO Modern Markets Initiative, whose study looked at the impact of this tax on pension plans estimates that the cost could be “startling”. Their analysis suggests that California and New York City funds would pay $1 billion and $500 million, respectively, in additional annual fees. The analysis further estimates that a hypothetical $2 billion pension fund would incur additional transaction costs of roughly $4 million per year. It is highly unlikely that Wall Street would absorb these fees, but would rather pass them on through higher commission rates.

In an environment of already challenging funded ratios and contribution expense, the last thing that our public pension systems need is another tax that could dramatically impact their solvency. As laudable as it might be to want to provide access to college for all, student loan relief, enhanced access to medical care, etc, the unintended consequences from this bill may far outweigh any benefit.