Bankers Lawyer Up to Fight Tax

Remember this ad for Infiniti Q45?

The commercial doesn’t really give you much information. We just know it’s a commercial for a florist car company. The ad campaign was pretty widely knocked as “zen marketing” – it’s supposed to make you feel good about the car. You just don’t know any facts. It could be a great car – or it could suck.

This is kind of how I feel about President Obama’s new budget. So far, it’s all a big tease. The administration is releasing bits and pieces but nothing of substance yet. It’s all a build up to the official 2011 budget proposal. Can’t you just *feel* the excitement?

What’s even more remarkable about the build up is that there’s already opposition to… um… something?

As it turns out, the Securities Industry & Financial Markets Association (SIFMA), the main lobbyist for Wall Street, has hired a top litigator, Carter G. Phillips of Sidley Austin, to investigate whether the proposed bank tax in the budget is constitutional. That’s what we know. Here’s what we don’t: what the tax is or how it will be implemented. Doesn’t that feel a little backwards to you?

The infamous bank tax, which I blogged about previously, now has a name: the “Financial Crisis Responsibility Fee.” It has a target: 50 of Wall Street’s biggest firms with assets of $50 billion or more. And it has a goal: reducing around $120 billion in expected taxpayer losses from TARP.

But other than that? Nothing. Which is why mounting an opposition just feels silly.

Even the lobbyists can’t quite articulate what they’re opposing. Andrew DeSouza, spokesman for SIFMA, said about the tax, “There is not even legislative language and thus it is premature to speculate on any potential actions beyond opposing the proposal itself as both punitive and counterproductive to increasing lending to support the economic recovery.”

So there.

The whole thing reminds me of fixing dinner for the kids while they scream that they hate zucchini. I know they hate zucchini but if you add a little cheese and sausage, you can sneak it in – isn’t that what politicians do best? Sneak the zucchini into our suppers? Can’t we wait and see what we’re having for dinner first before we order out?

But even though the bankers don’t know what the tax is all about, they’re already threatening to pass it along to consumers. JPMorgan Chase, in particular, is planning to stick it to its customers, with its CEO Jamie Dimon warning, “All businesses tend to pass their costs onto their customers,” he said, adding, “[t]hat’s not abnormal.” And yes, we expected the banks to push it through to consumers but you’d think that Chase would at least pretend to wait and see what it’s all about first. But then, this is the same bank that gobbled up $25 billion in TARP funds and proceeded to make plans to buy two new luxury corporate jets and build “the premier corporate aircraft hangar on the eastern seaboard” to house them. I wouldn’t expect much different.

Don’t misunderstand me: I’m not saying the tax makes sense, that it’s constitutional or that it’s practical. I’m just saying that maybe we should wait for Obama to throw back the tarp (pardon the pun) and reveal the specifics of the tax before we start hiring lawyers. But then, unlike Dimon, I didn’t get paid $19 million in 2008 as my company clung to life at taxpayer expense. So what do I know?

Comments

  1. Jose Anes

    A tax is a tax, no matter how you see it. It is a forced appropiation of what belongs to someone else. Some of them are needed for the common good — and the end results may be positive for society, but almost never for the individuals from which money is extracted from – not in the short term anyways.

    You can’t expect the financial industry to be happy at a tax proposal against them — any tax proposal (even if they haven’t provided the details). Just as much as consumers should not be happy about it knowing they will have to pay more, or earn less from money loaned or invested at banks.

    Just the talk about potential taxes puts people on the defensive, and makes them try to find ways to defend or recover from the new impact.

    Same goes for other taxes. Health care taxes, or taxes for “high earners” for example. Since they will apply to the services technical consultants like me offer, I will have to slap an “Obama Crisis Recovery Fee” to clients, one way or another (I am sure it will not read like that on the invoice).

  2. MommyLisa

    My concern. There is nothing in the legislation of this tax on the banks that prevents them from handing it back to us in the form of fees, reduced intrest on savings and other accounts, etc.

    It is so scary!

  3. John Kelly

    There’s a larger, more troubling issue here based on what we do know about the bank tax or the “Financial Crisis Responsibility Fee” which is neither a tax nor a fee. It’s a fine imposed as a tax. Because you tax something you don’t like to discourage it. Or you impose a fee on something to help pay for it. But you fine someone for something they did. I don’t necessarily like the use of taxes to achieve social goals either good or bad because they involve subjectivity and are generally inefficient. But if you think smoking is bad, you discourage it by raising taxes on cigarettes. The president made clear that this is targeted at banks that accepted TARP money and paid bonuses. Curiously the “responsibility fee” does not tax bonuses – past nor future. Nor does it target outstanding TARP loans. It’s like claiming to reduce cigarette use by taxing people who used to smoke. For all the bluster about recovering “every single dime the American people are owed” and “obscene bonuses”, the bank tax misses the mark on both – intentionally. It’s not based on bonuses paid. It’s not even based on unpaid TARP loans. It’s based on a bank’s net liability. Just banks – or we’d see GM, Fannie and Freddie in the cross hairs. Big banks that accepted TARP – whether they wanted to or not. Whether or not they continue to award executives big bonuses or pay back TARP loans. So it’s not about discouraging behavior you don’t like. It’s about the entity you don’t like. And my question is not what’s next. It’s who’s next.

  4. Evan

    “My concern. There is nothing in the legislation of this tax on the banks that prevents them from handing it back to us in the form of fees, reduced intrest on savings and other accounts, etc. ”

    Nor should there be!

    If you are for the tax you are for the business handing it back to us. It is that simple. The moment the gov’t gets (further!) involved in business the scarier this place is going to be.

    see CARD 2009 lol

  5. TTD

    I agree, it’s going to get scary and here’s a few more concerns. What if the value of the dollar continues to decline? How about we add hyper-inflation to the mix? Then taxes go up in addition to new taxes being created ( ex: new carbon tax designed to extract more wealth from taxpayers). What if credit freezes or gets too expensive? What if record unemployment sets in? Will our salaries keep pace with the loss of the value of the dollar, hyper-inflation, energy costs, taxes, etc. etc. Probably not.

    I don’t want to get into politics here but I hope people wake up and start looking for more info. on our governments dealings. Did you know the Federal Reserve isn’t even part of the Federal Government? Remember why the constitution was created? How about the Boston Tea Party? Those things are very real and happened not that long ago. Ok, I’ve probably said too much. :)

  6. garagefather

    None of this would be an issue if the feds would have let capitalism take its course. With capitalism, no one would have gotten a bonus at firms that were going bankrupt, if they would have been allowed to go bankrupt. For Capitalism to work, bad decisions have to be punished with failure while good decisions have to be rewarded with profit. Is it no surprise that bankers gave themselves bonuses? As far as they were concerned, they had a successful year considering the fact that when the year started they were looking at bankruptcy and now they are back on track and making money, with the help of tax money. Now the feds are angry and want pay back. Why did they assume that subverting capitalism would have no unintended consequences? Why would they assume that this new “tax” on banks won’t have unintended consequences?
    With capitalism there are no unintended consequences, only results from ones actions, since capitalism, in itself, has no intentions. My guess is that a lot of innocent people, who had nothing to do with any of this, will get the shaft as the banks pass this “tax” on to them. What will the feds do then? My guess is pass more legislation loaded with good intentions that end up shafting the innocent even more.

  7. Pingback: Support Growing for Bank Tax | taxgirl

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