A Wall Street lobbying group said President Barack Obama's plan to raise $110 billion over the next decade through a new tax on financial companies could stifle economic growth and make banks less likely to lend.
The proposal released Saturday would impose a seven-basis-point fee on the liabilities of the nation's biggest banks, investment firms and insurers. The Securities Industry and Financial Markets Association said the fee is an unnecessary attempt to rein in risk on Wall Street, following the enactment of the Dodd-Frank Act in 2010.
"The tax code is not the place for a broad, new and duplicative financial regulatory regime," SIFMA President and Chief Executive Officer Kenneth E. Bentsen said Sunday. The "targeted tax increase on America's most productive financial institutions could have far-reaching, unintended consequences that will curtail economic growth."
The tax proposal comes as Democrats have been increasingly sparring with Wall Street. Populist lawmakers in the party, including U.S. Senator Elizabeth Warren, have engaged in fights in the past month over efforts to roll back Dodd-Frank and used their clout to reject Obama's nomination of Lazard Ltd. (LAZ) banker Antonio Weiss for a key Treasury Department post.
Obama's initiative follows a similar tax proposal last year for banks with $50 billion of assets. The new plan would expand the tax to large money managers and insurers, while lowering the rate each company has to pay. The new proposal would raise about twice as much money as last year's plan.
"The imposition of a special, sector-only tax on the vast array of financial institutions captured by the president's proposal under the guise of further limiting excessive risk completely ignores the changes this administration, Congress, regulators and industry have implemented over the past six years," SIFMA's Bentsen said.
The bill faces uncertain prospects in Congress, where both the House and Senate are led by Republicans whose party has generally resisted tax increases. Former U.S. Rep. Dave Camp, a Michigan Republican who retired from Congress after leading the House panel that sets tax policy, proposed a similar fee that drew fierce opposition from banks last year.
The bank fee is part of a package of proposals released Saturday that would allow the White House to expand tax breaks for lower- and middle-income families. The Obama administration also proposed new taxes on the wealthiest Americans that would limit profits from investments and make it harder for them to pass assets on to their heirs.