Argument: Banks are unlikely to pass tax on to consumers

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James Surowiecki. “The two worst arguments against the bank tax.” The New Yorker. January 15, 2010: “Two main arguments seem to have emerged. The first argument (which, oddly, some people on the left as well as the right are making), is that any tax would be passed along to consumers. Now, this is an argument that can be, and is, made against any corporate tax, and given the fact that Americans think that corporate taxes make sense generally, there’s no obvious reason why this tax should be an exception. More important, it’s unlikely to be true. To be sure, some of the tax will be passed along. But the Obama proposal exempts banks of less than $50 billion from the levy, which means that to the extent that the big banks raise prices in response to the tax, they’ll be making themselves less competitive in the marketplace. Now, it may be that in arguing that consumers will end up paying this tax, what bank lobbyists are really admitting is that smaller banks just aren’t real competitors to the big banks and serve as no competitive check on their prices. But I don’t think that’s an argument—“the big banks are so powerful that they can pass any cost increases along to consumers”—that bank lobbyists really want to be making.”