The Camp bank tax: Right idea, wrong policy

Wall Street is at it again.

Not satisfied with decades of financial gains due to various federal programs – including government subsidies and tax credits that benefit the financial and real estate industries – the big banks decided they needed a bailout in 2008. Naturally, they claimed this was for the best for the entire nation, though most knew requiring Main Street to fork over hundreds of billions of dollars to bank executives was an error.

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And now they’re at it again. According to Politico, the financial and real estate industries are up in arms about the bank tax included in Ways & Means Committee Chairman Dave Camp’s (R-MI) tax reform.

Here are the basics on the tax itself. It would raise nearly $100 billion over 10 years, according to projections:

Mr. Camp’s bill would create a new tax on financial firms with assets greater than $500 billion that have been labeled by U.S. regulators as “systemically important” to the stability of the broader economy. It would require they pay a quarterly excise tax equal to 0.035% of their total consolidated assets that exceed the $500 billion threshold. The provision would raise $86.4 billion over the next 10 years, according to a summary of the bill that cited an estimate from the Joint Committee on Taxation.

The new tax “would address the significant implicit subsidy bestowed on big Wall Street banks and other financial institutions” due to the perception they are “too big to fail” and would be backed by the government in a crisis, the summary released by Mr. Camp’s office said.

Banks with assets holdings above the proposed $500 billion threshold include Citigroup Inc., J.P. Morgan Chase & Co., Bank of America Corp., Goldman Sachs Group Inc., Morgan Stanley and Wells Fargo & Co. Non-bank financial companies deemed “systemic” — including insurers like American International Group Inc. — would also be subject to the tax if they meet the criteria.

Mr. Camp’s bill would also limit another tax benefit for big banks: the ability to deduct premiums they pay for federal deposit insurance. Banks with greater than $50 billion in assets could make no such deductions, while banks with between $10 billion and $50 billion in assets would have their deductions reduced. That provision would raise revenues by an estimated $12.2 billion over 10 years.

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The reaction by the industry has been swift. Republicans are being threatened with the loss of millions in campaign donations, and House Majority Leader Eric Cantor (R-VA) has already met with lobbyists to assure them Camp’s bill is only a draft.

On the one hand, Republicans should laugh off criticisms by Wall Street. The industry has no moral or fiscal standing to criticize anything done by Congress that pushes back against its interests. So kudos to Camp for telling Wall Street to stick it.

On the other, however, this tax sets up Wall Street to have an even more powerful argument for its next bailout, since the taxes are designed to offset the costs of future bailouts: “We paid into it, so we deserve it.” Too Big To Fail is already official policy of the United States government, according to the first TARP Inspector General, who also says the banks are considered “Too Big To Jail” by many in Congress and the bureaucracy. But now it will have a “it’s not fair” argument, to boot.

Raising taxes is hardly a good idea even under the best circumstances. Camp has said the tax was instituted both for the bailout factor and to compromise with Democrats, but let’s be honest: Democrats have shown zero inclination to do anything positive this year – Senate Democrats won’t even put forth a budget – so “compromising” with them is not worth the paper it’s printed on, well-intentioned though it may be.

And giving Wall Street another argument for a bailout is argument enough to eliminate this tax proposal and put reforms that would make the bankers even angrier, but earn at least some trust from the American people: Make bailouts illegal, and eradicate any tax credits and loopholes they benefit from.

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Oh, and long-overdue jail time for some executives would be nice. And maybe some of their benefactors in Congress could join them.

Dustin Siggins is the Washington, D.C. Correspondent for Lifesitenews.com and formerly the primary blogger with Tea Party Patriots. He is a co-author of the forthcoming book, Bankrupt Legacy: The Future of the Debt-Paying Generation. His work has been published by numerous online and print publications, including USA Today, Roll Call, Hot Air, Huffington Post, Mediaite, and First Things.

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David Strom 10:00 AM | November 05, 2024
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