White House Vows to Recoup "Every Last Dime" for Taxpayers
President Obama said today that his proposed tax on financial firms is intended to recoup "every last dime" for American taxpayers.
"My determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at some of the very firms who owe their continued existence to the American people," Obama said from the White House.The Treasury Department has fleshed out the goverment's rationale for the tax, which it calls a "financial crisis responsibility fee." The tax rate is 15 basis points, as some had speculated. In the interest of getting that to you quickly, I've picked up, undigested, the key points. According to the feds, the tax would:
- Require the Financial Sector to Pay Back For the Extraordinary Benefits Received: Many of the largest financial firms contributed to the financial crisis through the risks they took, and all of the largest firms benefitted enormously from the extraordinary actions taken to stabilize the financial system. It is our responsibility to ensure that the taxpayer dollars that supported these actions are reimbursed by the financial sector so that the deficit is not increased.
- Responsibility Fee Would Remain in Place for 10 Years or Longer if Necessary to Fully Pay Back TARP: The fee -- which would go into effect on June 30, 2010 -- would last at least 10 years. If the costs have not been recouped after 10 years, the fee would remain in place until they are paid back in full. In addition, the Treasury Department would be asked to report after five years on the effectiveness of the fee as well as its progress in repaying projected TARP losses.
- Raise Up to $117 Billion to Repay Projected Cost of TARP: As a result of prudent management and the stabilization of the financial system, the expected cost of the TARP program has dropped dramatically. While the Administration projected a cost of $341 billion as recently as August, it now estimates, under very conservative assumptions, that the cost will be $117 billion -- reflecting the $224 billion reduction in the expected cost to the deficit. The proposed fee is expected to raise $117 billion over about 12 years, and $90 billion over the next 10 years.
- Apply to the Largest and Most Highly Levered Firms: The fee the President is proposing would be levied on the debts of financial firms with more than $50 billion in consolidated assets, providing a deterrent against excessive leverage for the largest financial firms. By levying a fee on the liabilities of the largest firms -- excluding FDIC-assessed deposits and insurance policy reserves, as appropriate -- the Financial Crisis Responsibility Fee will place its heaviest burden on the largest firms that have taken on the most debt. Over 60 percent of revenues will most likely be paid by the 10 largest financial institutions.