Obama Proposes New Tax on Banks

January 15, 2010 Taxation in USA

DiplomatUS President Barack Obama has proposed a new tax on financial institutions that could raise USD117 billion to repay the financial crisis bailout payouts.

In a speech on January 14th Barack Obama announced his intention to instate the Financial Crisis Responsibility Fee (FCRF), a tax which would be levied on financial institutions with over USD50 billion in consolidated assets. Under the new tax applicable organizations would be taxed at a rate equal to 0.15 percent of their total assets less high-quality capital and Federal Deposit Insurance Corp assessed deposits. If approved, the new tax would come into effect on June 30th and be instated for ten years or until the full repayment of the Troubled Asset Relief Program (TARP). The FCRF is expected to raise USD90 billion in its first ten years, and an approximated USD117 if continued over 12 years. It is estimated that over 60 percent of the tax’s revenues will be collected from the ten largest financial institutions. In order to be enacted, Obama’s proposed levy would require the support of US Congress.

Justifying the new tax, President Obama said, “…we want our money back and we’re going to get it.” He continued on to say that the new tax is not aimed at being a punishment, but rather a preventative measure to minimize risky financial behavior. Addressing the banks directly, Barack Obama continued to say “Instead of sending a phalanx of lobbyists to fight this proposal or employing an army of lawyers and accountants to help evade the fee, I suggest you might want to consider simply meeting your responsibilities.”

Photo by jurvetson