Wall Street’s warning shot to Ryan
The banking industry’s vigorous pushback against Rep. Dave Camp’s tax reform plan is a warning shot for his likely successor, Rep. Paul Ryan.
Like most industries, Wall Street isn’t worried that Camp’s (R-Mich.) plan could move through Congress in an election year. Plus, Camp is scheduled to be in his last year with the gavel of the powerful Ways and Means Committee.
{mosads}But the financial industry fears that Camp’s proposal to tax the nation’s biggest banks could someday make a comeback when lawmakers seek revenue generators for legislation.
With Paul Ryan (R-Wis.) poised to be Camp’s replacement, the industry wants him to hear their opposition to the tax loud and clear.
“This is so that, when a future set of lawmakers want to do tax reform, they view this as a nonstarter,” said one senior financial industry executive.
Banking groups big and small are making their opposition to the bank tax well known, even though the proposal would only hit the sector’s largest titans.
“We don’t want even the germ of this idea to take root and sprout and begin to grow,” said Camden Fine, chief executive of the Independent Community Bankers of America. “We need to eradicate this right from the start.”
Banking groups are meeting with lawmakers and their staff, and are keying in on top leaders. The industry carries significant fundraising clout as a top donor to both parties.
As an influential voice among GOP lawmakers on fiscal matters, Ryan was always going to be a top priority.
But the industry says that Ryan would become an even more critical figure as Ways and Means chief, and that they’re trying to send a message to any policymaker with an interest in rewriting the tax code.
“Everyone in the industry recognizes that there’s going to be tax reform at some point,” said James Ballentine, chief lobbyist for the American Bankers Association. “Knowing the players that are going to be involved in this is extremely important.”
Camp stunned the industry, and some of his colleagues, when he unveiled a tax reform plan that included a special tax targeted at banks with over $500 billion in assets. The proposal would generate $86 billion in revenue over 10 years, and helped ensure that Camp’s overhaul would not add to the deficit.
Clint Stretch said the banks’ response wasn’t surprising, but said other sectors took a lighter approach.
“A lot of business taxpayers are keeping the powder dry, in part because they like Camp and believe he’s trying to do serious work,” said Stretch, a former top official at the Joint Committee on Taxation and Deloitte Tax.
But for the financial industry, the Camp draft is just the latest battleground in the war against higher taxes — not just in the U.S., but around the world.
President Obama has also proposed a tax on the largest banks, meaning the idea has a bipartisan flavor. Across the Atlantic, European countries are trying to press ahead with a financial transactions tax.
“They can never really win,” Stretch said. “They can only keep from losing. So they have to keep fighting over and over again, just to keep from becoming a money machine.”
As part of that fight, banks and the host of other interested parties tracking the tax reform debate are adjusting to a shuffling of key positions.
Sen. Ron Wyden (D-Ore.), known for working across the aisle, has taken over the Finance Committee, a panel that could face more turnover if Republicans succeed in taking the Senate. And that’s not even to mention the change that’s coming to the White House in 2016.
All those new faces mean that banks, dying to stamp out the idea of a bank tax, need to send their message far and wide.
“The shot-caller is still the chairman of the committee, so you have to understand where they’re coming from, what their politics are, what their personalities are like,” said Fine. “Basically, you have to start all over.”
Still, banks think they are gaining traction. Over 50 of Camp’s House Republican colleagues sent him a letter earlier this month criticizing his inclusion of the “targeted, arbitrary” tax.
As for Ryan, he’s been keeping his cards close to the vest, with the likely knowledge he could be in Camp’s shoes soon. Like other members of the tax writing committee, Ryan offered conditional praise for Camp’s approach, calling it a “terrific first step” and inviting critics highlighting issues to offer something better.
In fact, banks have had a hard time nailing down exactly where Ryan, whose broad budget visions have won him many fans among conservatives, would fall on a specific provision like the bank tax.
“I don’t expect him to play his hand out publicly, or even with us,” said Ballentine,
Fine’s ICBA, which frequently rails against “too big to fail” institutions, said some Hill staffers had said they were stunned to see him vocally oppose a tax on some of their biggest competitors. But smaller banks fear they would be next if the big banks are successfully tapped as a revenue source.
“Once politicians find a well that produces revenue, they keep digging deeper to get more. And at the bottom of that revenue well is community banks,” Fine said.
Camp has cast the bank tax as essentially a trade, in which the banks receive a sharply lower corporate rate — from 35 percent to 25 percent, over five years — in exchange.
Stretch says that’s true enough, but also added that it illustrates why the community banks — who aren’t always on the same page with the larger institutions — have joined the fight.
“That sounds like an argument you could make to midsize banks, or small banks,” Stretch said. “That argument has to be a frightening argument for the midsize banks.”
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