Camp has proposed a new bank tax that has put financial executives on both sides of the aisle on the defensive.
With Democrats and Republicans offering proposals to hit the financial sector with new taxes or fees, financial executives and lobbyists say they are re-evaluating how they will direct their political cash this election cycle and where they will seek allies on and off Capitol Hill.
Even though the policy proposals, such as new fees on the biggest banks and higher taxes on some investment income, have almost no chance of becoming law this Congress, the proposals have Wall Street looking toward next year. And when it comes to fighting off new taxes, they may find friends in what is otherwise a foe: the tea party movement.
The two factions have found themselves largely at odds, with both seeking influence within the GOP. But in the case of taxes and financial services, they may have found common ground.
“Oh yeah, we’re on the same page for this one,” said Norbert Michel, a research fellow in financial regulations with The Heritage Foundation, a tea-party-aligned group. “We both dislike the tax.”
Michel, who has denounced a new bank tax put forward by House Ways and Means Chairman Dave Camp, R-Mich., said singling out the biggest banks is “a ridiculously bad idea, to put it bluntly.”
Meanwhile, President Barack Obama embraced a similar concept in his budget blueprint, which calls for a “financial crisis responsibility fee” for banks and other financial firms with more than $50 billion in assets. Both the Camp and administration proposals seek to change the tax treatment of carried interest.
“The whole point of tax reform is to get special provisions and breaks out of the code, not putting them in,” Michel said.
Financial executives on both sides of the aisle say the proposals have put their sector on the defensive and allows both parties to rally for political donations.
“It’s only one person on the [Republican] side of the aisle, to date, who has made these suggestions,” said Richard Hunt, president of the Consumer Bankers Association, who worked for Republicans on Capitol Hill. “I believe Dave Camp tried to get a reasonable place,” although Hunt opposes his bank proposal.
The battle between the tea party and Wall Street was perhaps at its height last fall during the government shutdown, when hard-line conservatives advocated for a breach to the nation’s debt limit, a move that appalled Wall Street and would likely have imperiled the global economy.
At the time, Democrats said it would buoy their case to woo campaign donations from financial executives, and many in the GOP agreed. But seven lobbyists and financial industry executives from both parties speaking only on condition of anonymity said the financial industry ultimately will donate to both parties, especially the leadership in both chambers.
“We have to play the game,” said a Republican financial services lobbyist. “We have no choice.”
A Democratic consultant added that with a tax overhaul likely on the congressional docket in the next Congress, the financial sector cannot afford to give only to one party — or to neither. “You have to support people on both sides of the aisle,” this consultant said.
Lobbyists for the financial industry say they are reluctantly embracing tea party groups in trying to generate opposition to the burgeoning tax proposals. For example, they are circulating Heritage and Club for Growth statements and blog posts against the tax proposals to Republican members of Congress.
“Wall Street and the tea party don’t respect one another, but this issue kind of squarely fits into exactly what they both feel strongest about,” said one financial industry lobbyist. “Wall Street feels like it’s punitive and the tea party feels it’s a slippery slope. They don’t like the idea that the tax code could be used to punish someone.”
Still, a Democratic consultant with financial clients noted aside from the single tax issue, “Wall Street and the tea party are not a cultural fit.”
Vice President Joe Biden waits to conduct a mock swearing-in ceremony with Sen. Brian Schatz, D-Hawaii, in the Capitol's Old Senate Chamber, December 2, 2014. Schatz was sworn in to serve the remainder of his term since he was appointed to the seat after Sen. Daniel Inouye, D-Hawaii, passed away.