In a surprising turnaround, the largest U.S. banks appear to be in the slightly shaky crosshairs of Republicans, who are proposing a 3.5 percent tax on banks with assets exceeding $500 billion.
The proposal from Representative Dave Camp (R-MI), chairman of the House Ways and Means Committee, first reported in Bloomberg News, would raise taxes on 10 companies, including the largest banks and non-banking institutions such as General Electric Company (NYSE:GE)’s financing arm. The bank tax is projected to raise $86.4 billion for the U.S. government over the next decade, the report noted, as it said the likelihood was the bill would not become law this year.
Bank tax first proposed by Democrats also went after smaller banks
The concept of an asset tax on the largest banks was first proposed in 2009 and again in 2010 by Democrats, noted Rob Blackwell of American Banker magazine. Camp’s proposal would only touch the largest banks, while Obama’s proposal was to tax banks with $50 billion or more in assets.
Noting a tonal shift from the Republicans in going after the banks, the move caught many by surprise as Republicans have traditionally been staunch supporters of the financial services lobby.
“It’s very meaningful that it’s Camp, a senior Republican, doing this,” Isaac Boltansky, a policy analyst at Compass Point Research & Trading LLC, was quoted in the report as saying. “It’s a tonal shift that we haven’t seen.”
Large banks likely not happy
Banks had been preparing for Camp’s proposal, according to the report. “A tax on banks and financial institutions, regardless of form, is misguided, would foster continued uncertainty and could have adverse impacts on economic recovery efforts,” a group of trade associations, including the U.S. Chamber of Commerce and the Financial Services Roundtable, wrote to Camp and top Ways and Means Democrat Sander Levin (D-MI) in 2010, the report noted.
Camp, who has authored controversial derivatives tax legislation that was opposed by the powerful financial lobby, is also known for his cooperation with large banks. Camp is one of the leading sponsors of fast-track legislation on the Trans Pacific Partnership, which would provide major SWAPs regulatory relief for the major banks. The fast-track legislation prevents legislators from debating the “trade bill’s” specific proposals before voting and keeps its provisions secret until it becomes law.
It is unclear if Camp’s proposal has a realistic chance of passing amidst likely strong lobbying from the financial services industry.