|A tax proposal levied at big banks and investors has Wall Street banding together in opposition. Bank of America, Goldman Sachs and JPMorgan are among big banks who have put lobbyists to work meeting with lawmakers to oppose the tax, reports Politico.
The legislators who proposed the tax claim that it will offset the government’s costs of dealing with “too-big-to-fail” banks, while other legislators and Wall Street officials who oppose it say the tax would hurt banks’ abilities to serve customers and provide loans that are vital to economic growth.
The Reasons Behind the Proposed Bank Tax
This tax proposal is surprising, because it originated not with Democratic legislators but with a Republican representative, Dave Camp of Michigan.
Republicans have a track record of siding with corporations and big business, but in the wake of the 2008 financial crisis, their support of big banks has clashed with their party line of fiscal responsibility and promotion of monetary austerity.
With the tax, which is part of a broader tax-revision package first introduced in February, Mr. Camp intends to “offset the lower borrowing costs [banks] receive from a perceived government backstop,” according to The Wall Street Journal.
Camp claims that this subsidy comes in the perception that banks are too big too fail, and that the government would intervene to save a bank from collapse at taxpayers’ expense — essentially an insurance policy for which banks don’t pay a premium.
Banks Oppose Tax, Say It Would Penalize Bank Loans
Banks, however, dispute this justification for the added tax, which would bring in $86 billion in revenue for the government over the next decade.
Representative Patrick McHenry (R, N.C.) told The Wall Street Journal that he opposed the tax, which he said unfairly singles out and penalizes the banking industry and would add to banks’ costs of providing loans. These costs could be passed on to consumer and hurt the economy, as less loans would mean less money flowing through it.
“Those of us that deal with financial-services policy every day are a little more steeped in the ins and outs of the consequences of the policies we make and their impact,” McHenry said.