Nearly a dozen trade groups sent a letter Wednesday to the House’s top tax-writer expressing strong opposition to a new fee on large financial institutions in his plan to overhaul the tax code.
The 11 groups said that while they support the efforts of House Ways and Means Committee Chairman Dave Camp (R-Mich.) they “strongly oppose the imposition of any arbitrary new tax on financial institutions.”
{mosads}They argued that singling out the banking sector would ripple through the economy and hurt everyone.
“A tax on financial institutions would amount to a levy on lending, retirement savings, credit allocation, and financial services to businesses, households, municipalities and investors with the effect of reducing availability and increasing costs,” the groups wrote hours after Camp released the discussion draft.
Under the plan, the biggest U.S. banks and insurance companies would have to pay a quarterly fee on assets exceeding $500 billion, which is expected to produce more than $86 billion over the next decade.
“A specific tax imposed on a single industry sector is wholly inconsistent with the fundamental purpose of tax reform — to broaden the tax base, lower rates, simplify the code, and reduce economic distortions that impede growth,” thtey wrote.
The groups said the proposed tax is “misguided and utterly at odds with the fundamental objective of comprehensive tax reform.”
Camp released his long-awaited tax reform plan early Wednesday afternoon, creating a firestorm of opposition among many groups that saw their tax breaks evaporate in the 1,000-page overhaul.
“The assessment will penalize customers, employees, and investors, increase the cost of capital for American businesses, and undermine the competitiveness of America’s financial sector, all of which will adversely impact economic growth and job creation,” they wrote.
Camp’s plan isn’t expected to move through Congress this year, with leaders on both sides of the Capitol and the aisle arguing that it is not politically feasible in an election year.
The banking and mortgage groups pointed to a 2010 letter where Congressional Budget Office Director Doug Elmendorf underscored expressed concerns about a similar tax that was suggested then.
Elmendorf said a the time that, “the cost of the proposed fee would ultimately be borne to varying degrees by an institution’s customers, employees and investors.”
The groups argue that means the “assessment would really be a tax on average Americans.”
Finally, they said that the increasingly competitive global economy, means that U.S. financial markets and their participants must be at their best.
“A tax on financial institutions risks driving capital formation and allocation overseas, to the detriment of American businesses, workers, and households,” they wrote.
“The proposal undermines the global competitiveness of a significant sector of the U.S. economy while a comprehensive tax reform bill should do the exact opposite.”