The Obama administration's proposed tax on large financial institutions is dangerous for both banks and the economy.
The administration's budget proposal would impose a tax of seven basis points on the liabilities of financial institutions with over $50 billion in assets. As a former member of the Senate Finance Committee, I think this proposal could put the entire banking industry, not to mention economic growth, at risk.
The proposal could impact even those banks under the $50 billion mark. This is because the way that Congress writes tax legislation does not always follow the process we all studied in our civics books.
While tax bills are considered in tax committees and on the House and Senate floors, the final product is often rewritten in a closed room by the congressional leadership and senior members of the tax committees. In that closed room, any tax proposal -- including proposals not included in the bills approved on the House and Senate floors -- can be considered. Furthermore, because spending programs often require revenue offsets, Congress could be tempted to attach such a tax to a spending bill.