The Camp bank tax: Right idea, wrong policy

posted at 12:01 pm on March 5, 2014 by Dustin Siggins

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.

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.

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.

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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We don’t have a revenue problem!!!!
We have a SPENDING problem!!!!!!!!!

dentarthurdent on March 5, 2014 at 12:05 PM

At least our tax code is simple and easily understandable.

Bishop on March 5, 2014 at 12:06 PM

Camp’s Tax Fiasco is DOA.

Someone should ask him why he, as Chair of House Ways and Means, thwarted a House vote on repeal of Medical Device Tax in Obamacare (after Senate passed it 79-20)

Reason? Camp dreamed of a big, splashy bi-partisan “tax reform” bill with Sen. Finance Chair Max Baucus. Baucus quit, leaving Camp stewing in his dreams of getting noticed and MSM kudos.

aquaviva on March 5, 2014 at 12:07 PM

I am all for taxing the too large to fail companies. But i would not term it that way. I would term it competitive fairness. All the rules and regulations that the too big to fail companies press congress into implementing cause an undue cost of compliance onto smaller and more importantly planning to start or just starting companies reducing competition.

This gets rid of the idea that they paid for their too big to fail bailouts and changes it to ensuring the rules they demand companies live by cost them overall as much as it does any perspective competitors.

So, I say we should not only make the companies live by the rules and regulations they demand, but tax those companies for compliance such that their size does not reduce to effectively no cost to them to keep the anti-competitive rules and regulations on the books.

Like Amazon pushing for state tax collections. They push for it because it will cost them pennies per hundred transactions to comply. But for the new competitor, they might end up having to spend tens of thousands of dollars before they have their first customer just to be able to start up.

astonerii on March 5, 2014 at 12:17 PM

We don’t have a revenue problem!!!!
We have a SPENDING problem!!!!!!!!!

dentarthurdent on March 5, 2014 at 12:05 PM

Actually we do have a revenue problem.
We would be making far more money if we did not have all the rules and regulations that make being too big to fail the prime model for a company.
The too big to fail is not what drives markets towards these massive companies, but the rules and regulations which become less burdensome as you can spread the cost over larger and larger companies.
Since they demand anti-competitive rules and regulations, I think they should pay for having less competition.
Call it the clear field taxation. Charge them x% for every regulation they benefit from that causes less competition in their market.

astonerii on March 5, 2014 at 12:20 PM

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.

…surprised?

KOOLAID2 on March 5, 2014 at 12:28 PM

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 –

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

Dustin, I read the comments for this kind of worthless mudslinging, not the article proper. You make a valid point in between on the implications of the tax, but I have to wonder who you’re writing for here.

If you have a problem with the big banks, make your case; Lord knows there’s plenty of material for doing it. But don’t push the tripe above on us without some reasoning.

SomeCallMeJohn on March 5, 2014 at 12:34 PM

What? Now there’s going to be a tax on camping? The war on Boy Scouts continues.

texacalirose on March 5, 2014 at 12:37 PM

astonerii on March 5, 2014 at 12:20 PM

That’s still not a revenue problem.
When spending consistently increases at a greater rate than income / revenue collection you have a spending problem.

If you want to talk tax code simplification and reduction in regulations, I’m all for it – but those are separate issues from the spending problem we have.
New taxes won’t solve the spending problem.

dentarthurdent on March 5, 2014 at 12:39 PM

OT- Rush just mentioned he’s a finalist for a childrens’ author award. So…… that popping you are hearing is liberal heads exploding.

You should have seen the look on my liberal sister-in-law’s face when one of her little snowflakes got Rush’s book for Christmas. Priceless.

Happy Nomad on March 5, 2014 at 12:39 PM

Put a noose around the neck of any legislator submitting legislation.

Have the clerk read it aloud to the executioner.

If the bill mentions raising taxes, the executioner takes that to mean “pull the lever” and the trap door under the miscreant legislator opens.

Akzed on March 5, 2014 at 12:47 PM

Sure, just try and tax those Occupy Wall Street camps. They don’t even wash, how can you expect to get a tax out of them? Some of them don’t even have a fixed address. I’m all in favor of taxing their wall street camps, of course, but it will never work.

HugoDrax on March 5, 2014 at 12:51 PM

Akzed on March 5, 2014 at 12:47 PM

I’ll second that motion!!

dentarthurdent on March 5, 2014 at 12:55 PM

I don’t care if someone makes a billion dollars. I do care if that billion dollars was made through the expansion of public debt or gambling with other people’s money without their permission; which is what’s happening.

If you want to reign in the banks, cut-off their ability to make money off of the government. They’ve been given an out-sized influence over the value of the currency since 2008, and they’re among the few who have the access to the market to mitigate its harms.

Moreover, prosecute people who made their banks take positions on the funds they manage (which is not their job) so that they might improve their standing within the bank if their bets pay-off. This stuff hurts investors, and is not pro-business. This was supposedly rampant in the industry, but I don’t think a single person has had to answer for it. Both parties have probably been covering for some big donors.

Issuing a tax is a band-aid. Government over-spending has enabled this abuse of currency, so it’s as much a budgetary problem as a banking regulatory one. Get those things under control and you’ll have more freedom to deal with the banks.

LancerDL on March 5, 2014 at 12:57 PM

LancerDL on March 5, 2014 at 12:57 PM

The tax serves as cover and protection money for such rackets.

Akzed on March 5, 2014 at 1:03 PM

The banks will pass the costs on to customers, and then perhaps fail altogether, and then be bailed out.

Would it not be simpler to STOP helping banks, STOP taking advice from their lobbyists, and STOP trying to increase regulation and taxation on them? In other words, step back altogether-the good old fashioned laissez faire approach.

Sure, they’d get less money, but they’d also get less hassle.

RockinRickOwen on March 5, 2014 at 1:08 PM

New taxes won’t solve the spending problem.

dentarthurdent on March 5, 2014 at 12:39 PM

I never claimed it would
What I did say was since these companies, through their regulate, regulate, regulate positions is costing us otherwise taxable income, I am all for forcing them to make up that loss.
If you run a company that does not rely on barriers to entry in the form of government regulations, then you deserve your money. But if you run a company that relies on burdensome regulations to limit your competition, then I am OK with the government taxing the bejebus out of them.
If you want less of something, tax it. Well, I want less regulation.

astonerii on March 5, 2014 at 1:11 PM

astonerii on March 5, 2014 at 1:11 PM

It’s still a new tax – and you seem intent on having the government take more money away from the economy.
We don’t need more new taxes, and we don’t need to increase revenue to the government.
We need to cut spending.

If you want to cut regulation, then do it – without putting in new taxes.

dentarthurdent on March 5, 2014 at 1:17 PM

It’s still a new tax – and you seem intent on having the government take more money away from the economy.
We don’t need more new taxes, and we don’t need to increase revenue to the government.
We need to cut spending.

If you want to cut regulation, then do it – without putting in new taxes.

dentarthurdent on March 5, 2014 at 1:17 PM

I am not intent on any such thing.
These companies are taking money out of the economy through abortive regulations. I want them to no longer want to increase and likely decrease the burdens.
The tax is to offset any benefit they get from pushing new regulations, to the point that they actually push to reduce the regulations.
Hence the reason for it and the method of implementing it.
The more regulated your industry, the higher your taxes. Every regulation that benefits the super huge company also taxes the hell out of them.

astonerii on March 5, 2014 at 1:21 PM

astonerii on March 5, 2014 at 1:21 PM

Sooooo – you want to punish the banks with higher taxes, because they are taxed too much now, because of regulations they pushed for that the government implemented, in order to make the banks suffer more, so they push for the government to reduce the regulations to reduce their taxes?
Did I get that right? Cuz I can’t make any sense of what you said.

Whatever it was you said, or tried to say, it sounds like you’re blaming the banks for the regulatory burden and tax rates instead of blaming the federal government that actually put it all in place.

dentarthurdent on March 5, 2014 at 1:57 PM

No tax reform unless it closes the doors on the IRS.

Period. End of story. Nada.

No tax reform unless it closes the doors on the IRS.

chuckh on March 5, 2014 at 2:07 PM

So the question what do we do with the too big to fail banks? Under the current structure, we are going to bail them out again if they fail. We can say we aren’t but we are lying to ourselves if we do. I’m not sure this “tax” is the solution but we have set ourselves up to repeat the disasters of before as it stands now. They have rigged the system for themselves. It is crony capitalism at its best and you have to admire they way they play the game at our expense.

argusx2002 on March 5, 2014 at 2:24 PM

No tax reform unless it closes the doors on the IRS.
Period. End of story. Nada.
No tax reform unless it closes the doors on the IRS.

chuckh on March 5, 2014 at 2:07 PM

Exactly why I favor elimination of ALL income and other taxes to be replaced entirely by only a sales tax – to be collected and submitted by existing state and local level agencies and processes.

dentarthurdent on March 5, 2014 at 2:24 PM

“Too Big To Fail Tax”
An excellent description, something Wall Street doesn’t seem to want to talk about except to say: It’s not fair!

As to the possible future bailout excuse of “We paid into it, so we deserve it”.
HAHAHAHAHA
Tell that to the SocSec recipients that are having their eligibility requirements changed. Tell that to the Retired Vets that have lost the 100% health-care coverage that was promised to them upon entering the service 20-30-40 years ago. And the PX and Commissary privileges that are being stripped away.
I would remind all of those Wall Streeter’s, if you’re TBTF, you should be considered Too Big To Exist, and in a rational world, you will be.

Another Drew on March 5, 2014 at 2:24 PM

So, the banks that “pay into the system” deserve their money in case of troubles, but ordinary people who’ve paid into Social Security and Medicare who retire will go without?
Let’s see how that plays out.

djaymick on March 5, 2014 at 2:26 PM

dentarthurdent on March 5, 2014 at 1:57 PM

I am all for deregulation if that is what you want to know.
But looking at the landscape we have for deregulation, it just is not going to happen.
And yes, I am all 100% for forcing companies to face consequences for their decisions that negatively impact others. Such as pushing for regulations that do little more than increase the burden of entry into the market.

astonerii on March 5, 2014 at 2:43 PM

Let’s put the CongresscrittersCongress Varmints in jail first. They are supposed to uphold the law, not create situations in which bigbiz almost has to pay bribes baksheesh campaign contributions in order to even have a business.

njcommuter on March 5, 2014 at 3:57 PM