Americans are frustrated with more than just Washington politicians. A recent ABC News poll found that a majority of Americans are “angry” at banks for their role in the recession and more than three-quarters feel banks should do more to “make amends.” Undoubtedly, many who blame big banks for the financial crisis like the idea of those institutions—particularly bailout recipients—paying higher taxes. Yet tempting as it may sound, Americans should be warned that collecting money from “big banks” is more difficult than one might expect. Taxes levied on business tend to find their way to costumers, workers, and anyone with a 401k. In other words, you'll be the one paying taxes that are supposed to hit Wall Street.
In March, the Congressional Budget Office (CBO) provided a helpful analysis of this dynamic when evaluating a proposed tax on banks with assets in excess of $50 billion. The tax was supposed to bring in $90 billion over the next decade and make good on President Obama's promise that “We want our money back and we are going to get it.”
Yet the CBO revealed that big banks alone wouldn't bear the burden of the tax. The CBO wrote, “The ultimate cost of a tax or fee is not necessarily borne by the entity that writes the check to the government. The cost of the proposed fee would ultimately be borne to varying degrees by an institution’s customers, employees, and investors...”
Customers would pay the tax through higher borrowing rates and other fees. Bank employees might see their compensation fall. And the CBO warns “the fee would probably lower the total supply of credit in the financial system to a slight degree. It would also probably slightly decrease the availability of credit for small businesses.” Less credit for small businesses will make it harder for those businesses to grow and expand, and—most importantly given our near double digit unemployment rate—to hire workers.