Replacing the income tax with a consumption tax would cut banks' annual tax tab by up to 60%, a panel of experts at the American Enterprise Institute for Public Policy Research agreed Friday.
"If we were to shift taxes from income to consumption, financial institutions would get a significant break," said Peter Merrill of Price Waterhouse, a leading expert on the taxation of financial services.
Under a consumption tax, the percentage of all corporate taxes banks would pay would roughly equal the industry's percentage of the gross domestic product. Currently banks' output comprises 8% of the nation's GDP, but the industry pays roughly 25% of the nation's corporate income taxes.
Bankers shouldn't hold their breath, however, because it would take several years for experts to work out the theoretical details of a consumption tax for financial institutions, Mr. Merrill said.
And then the new scheme would have to be sold to the American people - a difficult task at best, the panelists concluded.
- Scott Smith, Medill News Service