Bill Ackman, CEO of Pershing Square, says that America needs to find a way for individuals with no investment assets to “participate in the success of capitalism” – and thinks that adopting Australia’s superannuation system could be the way to go.
“Corporations could be required to set aside a fixed percent of salary or wages in a tax-free investment account for all workers that would also be restricted from withdrawal until retirement, similar to the approach used by the highly successful and popular Australian superannuation system, which has created savings of scale for growing generations of its citizens,” Mr Ackman said.
“Since the superannuation system’s launch in 1991, Australia now has $2.7 trillion of superannuation assets – nearly twice the country’s GDP.”
Mr Ackman also suggested the government could establish tax-free investment accounts for every child born in America, with funds invested in zero-cost equity index funds. He estimates that the initial account would be $6750 – costing the government $26 billion annually – but provide retirement assets of more than $1 million at age 65.
“We need a program that makes every American an owner of the compounding growth in value of corporate America,” Mr Ackman said.
“Compounded returns over time are indeed one of the great wonders of the world, and [everyday] we wait to address this issue, the problem looms larger.”
Mr Ackman believes that wage growth has not kept pace with long-term wealth creation, which has “disproportionately favoured the wealthy and upper middle class” due to higher after-tax returns generated by investment assets, while the housing crash destroyed other options for wealth creation.
“If we are to avoid continued political risk and disharmony which create serious risks to the sustainability of the capitalist system, we need to find a way for those left behind to participate to a greater extent in capitalism, broadly defined,” Mr Ackman said.
“This is an important problem that must be addressed, and it is incumbent upon all of us, particularly those of us who are the greatest beneficiaries of the system, to find a potential solution.”
