Bloomberg: Rich Americans Fleeing Tax Hikes May Turbocharge Shift to ETFs (May 2, 2021)

Bloomberg News reports that affluent individuals are looking at ETFs as one way to mitigate the possibility of higher capital gains taxes. The article begins as follows:

The booming ETF industry may be set to lure even more cash in the coming years as rich Americans facing higher capital gains taxes look to limit what they owe Uncle Sam.

President Joe Biden’s plan to double the rate those making more than $1 million a year pay on investment profits would accelerate a shift that’s already seen hundreds of billions of dollars migrate from mutual funds to exchange-traded funds, market watchers say. That’s because ETFs are generally more tax efficient, spinning off fewer capital-gain disbursements that for some could soon become a lot more costly.

In fact, by one measure, the tax efficiency of ETFs has been the single most important driver behind the tectonic shift in asset allocations in recent years. While the administration’s plan remains in its infancy and is sure to face intense scrutiny from lawmakers in the months ahead, even an incremental hike in the capital-gains rate would likely spur further ETF usage, according to David Perlman, an ETF strategist at UBS Global Wealth Management.

To see the full article (subscription may be required), click Bloomberg: Rich Americans Fleeing Tax Hikes May Turbocharge Shift to ETFs (May 2, 2021).

Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.

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