That's the first time since 2000 the tax drag exceeded 100 basis points, Roseen notes.

FORBES: Markets Down, Taxes Up

Roseen's report isn't about the taxes investors pay when they sell mutual fund shares for a profit.

FORBES: Markets Down, Taxes Up

Moreover, Roseen raises the possibility that mutual fund investors could be hit with a "double whammy" in 2008, as they were in 2000.

FORBES: Markets Down, Taxes Up

If you want to buy a tax inefficient fund, or one with a big capital gains overhang, put it in your tax-deferred accounts Roseen suggests.

FORBES: Markets Down, Taxes Up

But Roseen says the 2007 tax hit, combined with the prospect of higher tax rates when President George W. Bush's tax cuts expire at the end of 2010, could wake up investors to the impact of taxes on their long-term returns.

FORBES: Markets Down, Taxes Up