Argument: Bank tax is too small to impact deficit

Issue Report: 2010 US bank tax


Ezra Klein. “Obama’s bank-friendly bank tax.” Washington Post. January 15, 2010: “The bigger problem, though, is conceptual: Confining the tax to repayment of TARP when we’ve got a massive budget deficit and when further stimulus spending is constrained because no one knows how to pay for it is, well, a huge gift to the banks. There’s just no other way to put it.

There are a lot of ways to tax banks, and a lot of reasons to do so. You could do a financial transactions tax, as my college Steve Pearlstein proposes in his column today. You could tax size, creating an enduring disincentive to become too-big-to-fail, and giving consumers a reason to favor small-enough-to-handle banks. But however you do it, you should leave it open-ended so it continues to generate revenue in the future, helping to ease our long-term deficit problem.

Obama’s decision to sell this as a vicious attack on the banks seems like reverse-Tom Sawyerism: It’s an effort to make everyone believe that this tax is really bad and tough, when it isn’t. If anything, it’s protecting the banks from a much more punitive tax that isn’t limited to money they already have to repay.”