Freedom New Mexico
President Barack Obama is said to be considering a special tax (or fee or levy, as some might prefer to disguise it) on financial institutions, though the calculated leaks from the White House suggest the details are still up for grabs. Before he gets much farther it would be a good idea to drop the whole idea.
One rationale for the new tax is to try to recoup some of the money that is unlikely to be paid back from the $700 billion bailout of the banking business and other businesses. However, most of the banks have already paid back, with interest, what the government loaned them. The $120 billion that is unlikely to be paid back consists mostly of “loans” to automakers and their finance arms, and to the insurance giant American International Group. Would it be just to tax bankers, who paid the loans back, to compensate for others who didn’t? Not exactly.
It is likely, according to news stories, that the real reason the administration wants to impose a new tax on financial institutions is that large Wall Street firms that have managed to get back on their feet over the past year are about to announce executive bonuses. The politicos figure people will be angry, and Obama will get populist brownie points for “punishing” Wall Street.
The notion that government’s job is to punish unpopular people and sectors of society should be anathema to any fair-minded person. And there are other reasons to oppose a new tax.
First, it is illusory to suppose that financial institutions can be “punished” without also punishing their customers. A new tax will simply be passed along to consumers — bank depositors, people with 401-k retirement accounts and small investment portfolios and the like.
In addition, a new tax on financial institutions would be counterproductive to another goal President Obama claims to hold dear — getting banks to make more loans to help jumpstart the economy. Raising the cost of doing business will lead to fewer loans, not more.
If we are really beginning to recover from the recession, new taxes would hinder that recovery. That can hardly be one of the president’s goals, but it would be the result if he carries through on this ill-conceived idea.