Last year, Cyprus made headlines all over the world for the wrong reasons. Due to a financial crisis, the government instituted a tax upwards of 50 percent on bank deposits exceeding 100,000 euros – initially it was all deposits but the citizens were in upheaval. Now Spain is following the same financial path.
Earlier this month, the Spanish government introduced a 0.03 percent tax on all bank account deposits, according to a report from Reuters. The initiative, which is estimated to generate approximately half a billion dollars in revenues, is meant to complement tax regimes and to create revenues for cash-strapped communities.
Although the government had implemented a zero percent tax rate on deposits across more than a dozen autonomous communities last year, officials never prohibited the possibility of actually raising those tax levels.
Minister of Finance and Public Administration Cristobal Montoro told one news outlet last year that the tax wouldn’t affect savers but rather credit institutions to pay for the capture deposits.
“The autonomous communities receive timely and therefore financially compensation shall implement a moderate rate in the state tax on bank deposits,” said Montoro, who noted that the tax wouldn’t be higher than zero percent.
Here is what Zero Hedge stated in light of the news:
“In other words, the funding of the Spanish regions is now in the hands of those dumb enough to work hard and save their money. Because it is only ‘fair’ that they – not the banks that year after year are bailed out by the ECB (European Central Bank) – end up with the short stick.”
We reported earlier this year that European Union officials believe they can confiscate the personal savings from 500 million citizens in order to invest in long-term projects that can improve the economies of 28 countries. These confiscated funds would be allocated and transferred to small companies as resources for infrastructure and investment endeavors.
Last year, then-Bank of Canada Governor Mark Carney announced a bail-in program that would stave off a failure of major banks. Despite Carney arguing that it would be difficult to foresee banks touching depositors’ money, he did not rule out the possibility, which has troubled many, including Moody’s Investors Service.
On Friday, Moody’s downgraded the Canadian banking system from “stable” to “negative” over suggestions that Ottawa would bail out banks during a financial meltdown and the bail-in scheme being established.
“The accelerating global trend of governments to share the burden of bank resolutions with senior bondholders could reduce the predictability of government support in bank failure scenarios,” Moody’s Senior Vice President David Beattie said in a statement. “Our assumption has always been that the Canadian government would be very willing to support the major Canadian banks in the interest of economic stability and ensuring that the payment system operates correctly under times of stress. It’s clear their intentions have changed.”
The Inquisitor now opines that the United States may consider a deposit tax, too. It has been speculated that the federal government would require financial institutions to impose a tax on all deposits in order to fight the continuing decay of the greenback.
Individual wealth in the U.S. has grown from $56 trillion in 2010 to $82 trillion today. These families can well afford to pay more in taxes. Instead of raising the marginal rates on returns to capital (now at 18%) the CBO projects the marginal tax rate on labor will go from 29% today to 32% ten years from now.
Wealth has been under taxed and labor has been over taxed for decades. Below average families lost 70% of their net wealth since 1995.
Nevertheless, a 0.03% tax on deposits (as distinct from taxing all assets) is simply soaking the rich while providing little help to the poor.