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On May 4, the Senate Finance Committee held its second hearing on the Financial Crisis Responsibility Fee. This fee, a tax on certain financial institutions, is intended, according to testimony from Treasury Secretary Geithner, to "tax risk" and motivate banks that are impacted by the tax to reduce the incidence of the tax by reducing risky lending practices.
Where in the Tax Code is it stated that the purpose of the Code is to influence the evaluation of risk in financial transactions and encourage "less risky" behavior? All citizens undoubtedly want Troubled Asset Relief Program (TARP) funds to be repaid. But at what price? Unfortunately, there does not appear to be anyone on Capitol Hill who shares this view, so the Code will continue to evolve from a series of statutes that set forth the laws governing the tax system for the nation and into a "how to" book on how our lives are to be conducted.
It may be regrettable, but a fact of life nonetheless, that social agenda is the underlayment of tax policy. Aside from the need to generate revenue, social engineering at various levels will continue to define winners and losers in the tax arena.