The Obama administration has just proposed a new fee — otherwise known as a tax — on the country's largest financial institutions.
The tax aims to recover the difference between the bailout funds provided to these institutions a year and a half ago and the amounts ultimately returned to the Treasury. In so doing, the tax will allegedly reduce the federal deficit by some $90 billion.
This tax has popular appeal because the bailed-out financial institutions are now earning large profits and appear ready to announce huge bonuses for their executives. Given an unemployment rate of 10%, populist demand to punish bankers and financiers is almost inevitable.
Yet the proposed tax is misguided at every level.
The tax will not fall solely or even mainly on its desired political target, the shareholders and highly paid executives of large financial firms. The true burden of a tax often lands far from its intended target as the target attempts to shift the burden. READ MORE @ CATO
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