Financial Crisis Responsibility Fee
Encyclopedia
The Financial Crisis Responsibility Fee is a proposed tax by U.S. President Barack Obama
which would act upon certain financial firms, being imposed until that financial firm had paid off all money provided to it under the Troubled Assets Relief Program
. It was proposed in January 2010. The tax would only apply to those U.S. firms, or firms that received subsidies from the United States, with $50 billion or more in consolidated assets. The tax would be calculated by taking the total assets, subtracting that amount from Tier 1 capital
and insured deposits, and then tax the remaining amount at a 0.15% rate.
In February 2010, the Obama Administration made an announcement in order to further justify the imposition of this tax:
The Fee is still just a proposal as of October, 2011.
article that evaluated it along with other financial-industry tax-reform proposals, including the Defazio Financial Transactions Tax. The author favorably noted that the plan would (1) "eviscerate . . . a preexisting tax law preference for debt financing," and (2) "discourage the [concentration of power in] massive banks." Nonetheless, the author expressed concern that the Fee would (1) increase tax-compliance costs and (2) be unfair to stockholders of the affected banks.
Barack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...
which would act upon certain financial firms, being imposed until that financial firm had paid off all money provided to it under the Troubled Assets Relief Program
Troubled Assets Relief Program
The Troubled Asset Relief Program is a program of the United States government to purchase assets and equity from financial institutions to strengthen its financial sector that was signed into law by U.S. President George W. Bush on October 3, 2008...
. It was proposed in January 2010. The tax would only apply to those U.S. firms, or firms that received subsidies from the United States, with $50 billion or more in consolidated assets. The tax would be calculated by taking the total assets, subtracting that amount from Tier 1 capital
Tier 1 capital
Tier 1 capital is the core measure of a bank's financial strength from a regulator's point of view. It is composed of core capital, which consists primarily of common stock and disclosed reserves , but may also include non-redeemable non-cumulative preferred stock...
and insured deposits, and then tax the remaining amount at a 0.15% rate.
In February 2010, the Obama Administration made an announcement in order to further justify the imposition of this tax:
"Excessive risk undertaken by major financial firms was a significant cause of the recent financial crisis. . . . The fee would . . . provide a deterrent against excessive leverage for the largest financial firms."
The Fee is still just a proposal as of October, 2011.
Evaluation
This proposal has received mixed support. It was endorsed in a Tulane Law ReviewTulane Law Review
The Tulane Law Review, a publication of the Tulane University Law School, was founded in 1916, and is currently published six times annually. The Law Review has an international circulation and is one of few American law reviews carried by law libraries in the United Kingdom.-History:The Law Review...
article that evaluated it along with other financial-industry tax-reform proposals, including the Defazio Financial Transactions Tax. The author favorably noted that the plan would (1) "eviscerate . . . a preexisting tax law preference for debt financing," and (2) "discourage the [concentration of power in] massive banks." Nonetheless, the author expressed concern that the Fee would (1) increase tax-compliance costs and (2) be unfair to stockholders of the affected banks.