Last week, the Obama administration proposed a .15 percent tax on financial institutions with more than $50 billion in assets, to be assessed on liabilities, minus deposits. Since the announcement, the banking lobby — along with Republicans in Congress — have been bemoaning the supposed burden of the fee. Yesterday, Steve Bartlett, President and CEO of the Financial Services Roundtable (which represents the 100 largest financial firms in the country), appeared on C-Span to complain about the “bizarre, punitive” tax. He said that, in his view, the tax constitutes a illegal bill of attainder for singling out companies for taxation:
It is one of the more bizarre, punitive taxes I’ve ever seen. It’s sort of portrayed as a tax, and also as a way to pay back the TARP and also as a way to punish people who are expressing their views in Congress…This fee or tax is kind of a tax in search of a purpose…It singles out fifty specific companies, and those fifty companies would pay this tax.
Bartlett is not the only one playing the “unconstitutional” card. The Securities Industry and Financial Markets Association (SIFMA) has reportedly hired a lawyer to look into challenging the tax on constitutional grounds. But as the New York Times reported, “legal experts have called those claims dubious.” And Bartlett is just flat-out wrong that the proposal singles out fifty specific companies. In fact, it lays out a clear criteria for which firms will be affected, not naming any one in particular. This makes the case for a bill of attainder tenuous at best.
On a more substantive note, the banks are continuing to moan and groan about a proposed tax that is really quite tame. Its aim is to collect $90 billion over ten years, which amounts to $9 billion a year, from all the covered institutions collectively. JP Morgan, which just announced quarterly profits of $3.3 billion — while upping its 2009 compensation pool to $26.9 billion — would be responsible for paying just $1.5 billion annually, which is the most of any institution.
Dean Baker did some back-of-the-envelope calculating and found that “the tax will be equal to roughly 5 percent of the combined profits and bonuses at the large banks.” So it clearly could have been higher, for a longer period of time, and been allocated to continued deficit reduction even after all of TARP has been repaid.
As Paul Krugman wrote, the banks are acting like “a drunk driver who, after killing a number of pedestrians, received life-saving treatment at a nearby hospital — and responds by suing the doctor.” And it really seems that they are ready to call as out of bounds any step aimed at fully compensating taxpayers for their role in salvaging the financial system.