Americans & Taxes: An Individual Investor Survey Investors weigh in on the new Tax Cuts & Jobs Act March 1, 2018 TD Ameritrade Institutional, Division of TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. 2018 TD Ameritrade IP Company, Inc.
Executive summary On December 22, 2017, U.S. President Donald J. Trump signed into law the Tax Cuts & Jobs Act, which made sweeping revisions to the federal tax code. The new law, which took effect on January 1, includes changes to individual and corporate tax rates, deductions and taxes on investments. TD Ameritrade Institutional set out to learn how investors felt about the changes and how they might respond in the coming year. What follows are some key findings: 75% of U.S. investors say they re unclear on how they will be impacted Investors trust financial advisors most for guidance on the changes. For better or worse, 57% expect some change to their take-home pay. Investors are mixed on how the U.S. economy will be impacted: 41% say the benefit will be positive 35% predict negative outcomes 2
Executive summary 55% say the very wealthy benefit most from the changes, and 63% believe anyone who makes more than they do will fare better. 30% will invest more in individual stocks. Though 24% overall would consider moving to a state with lower taxes, nearly a third of respondents from high-tax states are considering a move. Respondents overall didn t have strong views on the tax plan 49% are neutral on the plan but 22% said love it while 29% hate it. Individuals within certain groups divided by politics, household wealth and home state residence -- harbor much stronger opinions. 3
Methodology Results for the TD Ameritrade Institutional 2018 Americans & Taxes Study are based on an online survey fielded by Koski Research on behalf of TD Ameritrade Institutional, a division of TD Ameritrade, Inc., from January 18 through January 22, 2018. 1,000 U.S. investors at least 18 years of age with at least $10,000 in investable assets participated in this study. Participants, both clients of TD Ameritrade Institutional and non-clients, were asked to share their views on the new tax law and how they anticipate it will affect their financial behavior. Thirty percent of participants self-identified as Republican, 40% as Democrats and the remaining 30% said they were Independents. The margin of error is ± 3%. Koski Research and TD Ameritrade and separate and not affiliated and not responsible for each other's services or policies. 4
Investor expectations
Impact of new tax law is still a mystery Don t understand at all 17% Understand completely 25% 75% of investors are unclear about the impact to them Understand some 58% Q20: How well do you feel you understand the following: The effects of the tax law on me personally 6
Some investors are expecting fatter paychecks Does the new tax law mean you expect more money in your paycheck? I don't know 9% About the same 34% More 35% 57% expect some type of change to their paycheck Q7: Updated tax withholding instructions will go into effect starting in February 2018. Do you expect to see more or less money in your paycheck starting in February as a result of the new tax law? 7 Less 22%
The national economy could benefit Impact of the new tax law on the national economy Mostly negative 35% Mostly positive 41% No change 24% Q2: What kind of impact do you think the new tax law will have on the national economy? 8
Investors say grass is greener for the wealthy Who benefits the most from the new tax law? I don t know 14% No one Everyone equally 5% 5% Very poor 1% People making less than me 23% Low income Middle class 6% 17% People making more than me 63% Upper middle class Very wealthy 14% 55% Compared to me In general Q8: Which of the following do you believe? Q9: Who do you think will benefit the most from the new tax law? 9
Investor actions
Investors trust advisors the most for tax help Financial advisor 25% TV news Accountant Tax preparation services Financial institutions Print or online news sites Other/none 17% 14% 11% 9% 8% 6% Friends/family Social media Radio 2% 2% 2% Q17: Which source would you trust most for information about the new tax law? 11
Tax law heightens interest in stocks How the new tax law impacts equity investments 30% 23% 15% 35% 40% 36% 9% 12% 11% 23% 26% 40% 12 Stocks Stock Mutual Funds Equity ETFs Don't invest in these Expect to decrease No change Expect to increase Q12: How will the new tax law impact how you invest in the following, if at all?
Investors plan to add to retirement accounts With the tax law in place, increasing retirement contributions gains appeal Doesn't apply to me 17% I definitely will do this 21% I don't expect to do this 26% 57% planning or considering increased contributions I am considering doing this 36% Q11: Are you considering doing any of the following in the 2018 tax year, after the new tax law goes into effect? 13
Moving is also a possibility for some Relocation to state with lower taxes as a result of the new tax law Doesn't apply to me 21% I will definitely do this 5% I am considering doing this 19% 24% are at least considering relocation Q11: Are you considering doing any of the following in the 2018 tax year, after the new tax law goes into effect? 14 I don't expect to do this 55%
Most do not expect to pay less taxes for 2018 Investor expectations on how much they will now have to pay in taxes I don't know 13% I will pay more 33% I will pay less 30% Q6: How do you expect the new tax law will impact how much you pay in taxes? 15 I will pay about the same 24%
Investor sentiment
Where they live impacts investor views on taxes I'm planning to move (or considering) 24% 32% I'll have to pay more taxes 33% 44% It will negatively impact my state 37% 50% Hate it 29% 40% High-tax states (CA, CT, MA, NJ, and NY) All states Q1: Which of the following best describes your overall feelings about the new tax law? Q4: What kind of impact do you think the new tax law will have on the economy of your state? Q6: How do you expect the new tax law will impact how much you pay in taxes? Q11: Are you considering doing any of the following in the 2018 tax year, after the new tax law goes into effect? 17
How they voted influences sentiment on taxes Overall feelings about the new tax law Political Party Affiliation 22% 29% 49% Total average Independents Democrats Republicans 9% 8% 20% 26% 54% 49% 42% 42% 50% Q1: Which of the following best describes your overall feelings about the new tax law? 18 Love it Hate it Neutral
Household wealth also informs viewpoint Overall feelings about the new tax law Household Investable Assets 29% $250K+ 27% 30% 43% 22% $100K $249K 22% 34% 44% 49% Total average 29% <$100K 20% 51% Hate it Love it Neutral Q1: Which of the following best describes your overall feelings about the new tax law? 19
Demographics
Demographics Male Female Gender 47% 53% Median household income $67,500 Median investable assets $75,000 Generation Region 22% 42% Millenials (21 37) Gen X (38 53) West Midwest 23% 21% 36% Baby South Boomers (54 70) Northeast 18% 38% 21
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