"The more I think on Obama's tax, the more it seems like an almost insulting proposal."

Ezra Klien on Obama's bank-friendly bank tax: 

Apparently, some liberal lawmakers think Obama's proposed bank tax is too small:

Rep. Peter Welch (D-Vt.) introduced a bill Thursday that would impose a 50 percent tax on big bank bonuses and use the money for small-business lending; nearly two dozen lawmakers signed up as co-sponsors. Proposals already pending in the House include a 75 percent tax on bonuses and a new tax on all financial transactions. Meanwhile, House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.), who favors the administration's proposal, is planning to hold hearings next week to consider additional measures.

Good. The more I think on Obama's tax, the more it seems like an almost insulting proposal. TARP repayment is a provision of the TARP law. Moving it up from 2013 to 2010 is not a grand populist maneuver. It's a change in timing. And given that the banks are pulling in record profits right now, it's a change in timing that actually fits their balance sheets.

The bigger problem, though, is conceptual: Confining the tax to repayment of TARP when we've got a massive budget deficit and when further stimulus spending is constrained because no one knows how to pay for it is, well, a huge gift to the banks. There's just no other way to put it.

There are a lot of ways to tax banks, and a lot of reasons to do so. You could do a financial transactions tax, as my college Steve Pearlstein proposes in his column today. You could tax size, creating an enduring disincentive to become too-big-to-fail, and giving consumers a reason to favor small-enough-to-handle banks. But however you do it, you should leave it open-ended so it continues to generate revenue in the future, helping to ease our long-term deficit problem.

Obama's decision to sell this as a vicious attack on the banks seems like reverse-Tom Sawyerism: It's an effort to make everyone believe that this tax is really bad and tough, when it isn't. If anything, it's protecting the banks from a much more punitive tax that isn't limited to money they already have to repay.

Posted via email from Jim Nichols