Tax incidence

Bad news for those saying that it\’ll just be the banks paying any further taxes on the banking system:

In a report on the White House\’s plan to impose a 0.15pc fee on liabilities of banks with more than $50bn in assets in order to recoup money lost through the $700bn Troubled Assets Relief Programme, the Congressional Budget Office (CBO) said the impact on banks would be \”small\”.

\”The cost of the proposed fee would ultimately be borne to varying degrees by an institution\’s customers, employees and investors, but the precise incidence among those groups is uncertain,\” said the CBO in a letter to Senator Charles Grassley, a leading member of the Senate finance committee.

The CBO went on to say that customers could face higher rates for borrowing and increased charges, while investors could face lower share prices. It added that employees may receive less compensation as banks attempt to pass on the fee.

Now note that this isn\’t the same as the Robin Hood Tax. It isn\’t a transaction fee: it doesn\’t get paid when liabilities change….just on the total amount extant at one particular moment in the year (presumably, when the bank publishes its annual balance sheet).

Just as a little bonus, guess who gets this entirely wrong in his report?

In addition, whilst financial transaction taxes should only eliminate
marginal trades but leave markets intact with ample liquidity, the proposed rate of the US levy at 15 basis
points is well above margins on many of the trades noted in this report and is consequently likely to be
harmful to the operation of some markets.

Yes, that\’s Our Ritchie, revealing his misunderstandings once again. He\’s referred to the annual charge on liabilities as if it\’s a tax on transactions. Aren\’t we lucky to have such a genius reorganising the globe\’s financial markets for us?

But even if it isn\’t the same as the RHT we\’ve still got exactly the same problem. Who carries the economic burden of the tax?

2 thoughts on “Tax incidence”

  1. It had been 2 days since you had last exposed on that brainless FF (fat fuck). I was wondering if you were going soft.

    Have you noticed that almost nobody seems to comment on his site any longer, and the few who do have got such insightful contributions as “Good to have some good new on this! Keep it coming”.

    Since the vast majority of his postings consists of references to the rantings of his far-left comrades in the Guardian or worse, followed by a deeply analytical comment like “I agree”, or “he/she is right”, why does does he not shut the whole thing down and just comment directly on CiF, just like any other mediocre left-wing troll does.

    That would be the environmentally sensible thing to do.

  2. Pingback: FCAblog » This is why I take on Richard Murphy

Leave a Reply

Your email address will not be published. Required fields are marked *