The Bank Tax and the Bay State
Obama's proposed levy would hit Massachusetts hard.


John Berlau

Boston-based Eaton Vance Corp., which offers investment-management and brokerage services, is another non-TARP recipient that could be hit by the Obama tax, since it has $163 billion in assets under management. Eaton Vance employs about 700 workers in Massachusetts, and was recently listed at #43 in the Boston Globe’s 100 “Top Places to Work.”

Then there are the Massachusetts-based insurance-holding companies Liberty Mutual Group and MassMutual Financial Group, which employ thousands in the state. These firms also did not take a dime of TARP money, but they would likely be subject to the tax because their assets far exceed the $50 billion threshold. The White House fact sheet does say that “the base for the fee would be appropriately reduced based on insurance policy reserves” for policies subject to state guarantee funds in the event of failure. But the fee would still be a significant cost for insurers and policyholders who had nothing to do with the financial-sector implosion.

“Virtually every examination of what caused the financial meltdown in 2008 has shown that property/casualty insurance played little or no significant role in the crisis,” the National Association of Mutual Insurance Companies said in a statement. “By asking insurers to pay this fee, President Obama is asking those who acted responsibly to pay for the Wall Street firms that gambled with their customers’ money and lost.”

In addition to the jobs that would be affected, the Obama tax could lead to higher fees and premiums, lower stock and insurance-company dividends, and less credit available to form new businesses. As noted financial-services analyst Meredith Whitney told the New York Times, “To think that it won’t come out of consumers and businesses is mistaken.”

– John Berlau is director of the Center for Investors and Entrepreneurs at the Competitive Enterprise Institute. Nothing in this commentary should be construed as an endorsement of any candidate.