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James R. Barth
Senior Fellow
Banking and Capital Markets and China and Europe and Financial Innovations and Global Economy and Public Policy and Real Estate and U.S. Economy
Dr. James R. Barth is the Lowder Eminent Scholar in Finance at Auburn University and a senior fellow at the Milken Institute. His research focuses on financial institutions and capital markets, both domestic and global, with special emphasis on regulatory issues.
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Should we impose even higher taxes on U.S. banks?
By: James R. Barth
October 26, 2012
   
   
President Obama's Fiscal Year 2013 Budget proposes to impose an additional fee (tax) on U.S.-based bank holding companies, thrift holding companies, certain broker-dealers, as well as companies that control insured depositories, with assets in excess of $50 billion.

But is this a good idea? The U.S. corporate tax rate on domestic bank income already is the fifth highest rate among 113 countries around the world, as the table below shows. The U.S. rate at 38 percent is 14 percentage points higher than the average rate (24 percent) for all the countries. It is also more than twice the tax rate that Germany levies on its banks. Today, many banks, especially big banks, provide banking services globally and not just in their home countries.

Imposing such a high tax rate on U.S. banks only serves to weaken their ability to compete with banks that are taxed at lower rates in other countries. Do we really wish to put our banks at a competitive disadvantage to banks in other countries? We think to do so is a bad idea.

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