James Pethokoukis

Politics and policy from inside Washington

A bank tax? Really?

October 18, 2010

I just did a CNBC  spot debating whether robust banks profits should spur new efforts to tax them. Here were my talking points:

1. My Hill sources tell me the bank tax is not going to happen, at least not the Geithner version.

2. That being said, Dems will surely raise it again both as a way of paying for high-end tax cuts and a way of making banks less reliant on short-term funding. The whole idea might also be coupled with a transaction tax.

3. The TARP rationale for the bank tax has collapsed with banks paying back their bailout funds.

4.  What banks do need to worry about is a future bank tax that would pay for Fannie and Freddie losses. There are Republicans who would vote for that.

5.  Is is a good idea? Given all the uncertainty raised by Dodd-Frank, do we really want to add a punitive bank tax? To begin with, this idea came from David Axelrod, not Tim  Geithner or the Obama econ team. And how would it add one decimal point to GDP or create one job?

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