Wall Street Reacts To Obama Tax Proposals

Shortly after Pres. Barack Obama unveiled his latest tax proposal during the recent State of the Union Address, financial services industry participants, republican lawmakers and top lobbyist on Wall Street have all voiced their criticisms of the would-be policy.

The Securities Industry and Financial Markets Association contended that the new tax, which would place a seven-basis point levy on the liabilities of the largest banks, insurance firms and investment management companies in the U.S and Wall Street., is a superfluous attempt to manage industry risk and could undermine lending, according to Bloomberg.

Obama announced this new plan in his most recent SOTU address after floating a similar proposal last year, when he suggested imposing a tax on the liabilities of banks holding $50 billion in assets, the media outlet reported. The new plan, which would generate tax revenue that is estimated to be twice as high, would extend to asset managers and insurance firms and provide a lower tax rate than the original proposal.

SIFMA president and CEO Kenneth Bentsen weighed in on the policy in a statement released Jan. 18.

‘Unintended consequences’

“Tax rules are often blunt instruments, and the tax code is not the place for a broad, new and duplicative financial regulatory regime,” he said. “This $110 billion targeted tax increase on America’s most productive financial institutions could have far-reaching unintended consequences that will curtail economic growth and job creation while negatively impacting the allocation of credit and the provision of financial services to individuals and institutions.”‎ ‎

He was not the only industry representative who spoke out against the proposal, as James Ballentine, chief lobbyist at trade organization the American Bankers Association, emphasized the challenges the new tax could create for the financial services industry, according to The Financial Times.

‘Difficult time’

“This really comes at a difficult time for an industry that is moving the economy forward,” he said, the media outlet reported. “To impose a fee, a flat tax, is certainly not warranted, and I hope Congress will reject this idea.”

Bentson also asserted that the proposed change was coming at a bad time and that it appeared oblivious to all the changes that lawmakers and regulators have made since 2009, according to Bloomberg. While he emphasized that government officials have been working on changing the regulatory environment for years, democrats in congress have been playing tug of war with industry as its representatives make an effort to take the bite out of the Dodd-Frank Act.

These struggles could experience key shifts after the republicans managed to enjoy key victories in both the House and Senate. These conservative lawmakers are not likely to approve another tax hike, as they have argued that such efforts hold back economic growth, according to The Financial Times.