One Senate Democrat's proposal to end a tax break for exchange-traded funds is "pretty unlikely to pass," ETF Trends chief investment officer and director of research Dave Nadig told CNBC's "ETF Edge" this week.
"I think the chances are fairly low," Nadig said in a Monday interview. "It's easy to look at this and say, 'Well, gosh, this is a thing that rich guys are taking advantage of.' It's actually smaller investors that benefit the most from this."
Crafted by Senate Finance Committee Chairman Ron Wyden, D-Ore., the bill suggests stopping the tax break on in-kind transactions, which enable ETF managers to sell out of positions without triggering capital gains taxes for the end investors. It would exempt ETFs in tax-deferred retirement accounts.
"It puts an ETF and a traditional mutual fund pretty much on the same footing, which means if somebody has to sell inside the portfolio, there's a taxable event," Nadig said.
Though Wyden said the plan applies to "taxable accounts of the wealthiest investors," they have many ways to gain tax advantages outside of ETFs, which are "by no means" their primary way of doing so, Nadig said.
"This is pretty regressive and for that reason I think it's pretty unlikely to pass," he said. "But the reason? To try to raise revenue, obviously."