For all the talk about fairness and equity with the so-called Buffett Rule, there is one sneaky loophole in the Obama revenue proposal that has largely escaped notice.
In doublespeak that would make even George Orwell do a doubletake, President Obama’s “financial crisis responsibility fee” would tax banks, insurance companies and brokerage houses that have paid back their bailout money — and even some firms that never took a bailout — to pay the tab of irresponsible firms, namely the auto companies that still owe the government billions.
“We also ask the largest financial firms — companies saved by tax dollars during the financial crisis — to repay the American people for every dime that we spent,” President Obama proclaimed in the Rose Garden on Monday. But the fine print in the 80-page plan the president submitted to the Joint Committee on Taxation makes it clear that this fee will only be on firms that have already repaid the Troubled Asset Relief Program funds and likely on some firms who never took a dime of taxpayer money.
“Although many of the largest financial firms have repaid the Treasury for their TARP assistance, they continue to implicitly benefit from the TARP funds that bolstered their balance sheets during a period of great economic upheaval,” the administration states. A fee of an unspecified amount “will be restricted to financial firms with assets over $50 billion and will be imposed until all TARP costs have been recouped.”
Notice that for all the talk of “repayment,” the tax is not on recipients of TARP per se, but financial firms with assets of more than $50 billion. Fidelity Investments, for instance, has weathered the storm relatively well and has not taken any TARP money. But since it has assets of more than $1 trillion under management, Fidelity would still likely be hit by the Obama tax. And some of the TARP recipients, like BB&T Corp., hadn’t engaged in the foolish mortgage and credit practices, yet were pressured by the government to take the bailout money so the “bad banks” wouldn’t be stigmatized by taking TARP money.
Oblivious to these contradictions, the Obama plan argues that “shared responsibility requires that the largest financial firms pay back the taxpayer for the extraordinary
support they received.” Yet there is no responsibility, “shared” or otherwise, for the auto companies General Motors and Chrysler that still owe the taxpayer billions. In fact it gives GM and Chrysler a free ride to cave to the United Auto Workers’ demands for thousands more unionized workers, as GM recently did in sham “negotiations” with the union bosses.
The White House “wants to make the nation’s largest banks pay for the losses incurred in the $85 billion auto bailout,” reports the Detroit News. And “last month, the Treasury Department raised the government’s estimate of taxpayer losses due to the auto bailout by more than $400 million to $14.33 billion,” the paper adds.
What this really means is that ordinary Americans — “working-class folks” as politicians like call them — will pay for the auto bailouts twice. Once through their tax dollars, and again when their banks and insurance companies pass on the cost of the “responsibility fee” through higher borrowing costs, higher policy premiums, and lower returns on savings and investment. How does Warren Buffett’s secretary benefit from that?!