Public outrage over the recent bonus payments to investment bankers has resulted in another predictable battle between Main and Wall Street. With a president who advocates social equity, it is no surprise that Barack Obama has proposed a “Financial Crisis Responsibility Fee,” or if one sits on the other side of the table, a “revenge tax” as so eloquently put by a former Bush administration official. Regardless of one’s view on the matter, this 1.5% levy against the liabilities of banks with assets in the excess of $50 billion is contradictory to basic economic theory. According to Concept Capital in Washington, annual fees are expected to amount to $2.2 billion for Citigroup and $2 billion each for Bank of America and JPMorgan Chase. At a time where the velocity of circulation is considerably low, adding such a prominent expense will surely affect the bottom line of all larger financial institutions, resulting in a further reluctance to lend and a further slowdown in the flow of capital.

Defenders of the banks and the banks themselves have claimed that the $90 billion the tax plans to raise will go towards losses not perpetrated by the banks themselves. TARP had given the auto industry $66 billion in loans, an amount that will likely not be paid back in full. The Democratic counterclaim is that the recession was brought upon by the banks, followed by a Republican counter-counterclaim that the auto industry was in bad shape from the onset.

And there are the realities of partisan politics. This tax still needs to be pushed through congress, an area where intense criticism and debate is already taking place regarding Mr. Obama’s healthcare reform proposal. Whether or not the tax is beneficial is yet to be determined, however the world is aware that the decision on whether or not to implement it will take a significant amount of time. The choice to not place the tax on bankers’ bonuses likely results from what has happened in the UK after a similar proposal. London mayor Boris Johnson has been quoted saying that the tax on bonuses may drive 9,000 bankers out of the country.

Putting aside partisanship for a moment, there is one clear fact. The United States is in dire need of money. With the current tax regime left unchanged, analysts have predicted that US gross debt will increase to 100% of real GDP by 2020, with interest and service charges amounting to $723 billion per year. So it seems that the US Government bears striking similarities to its citizens: it spends more than it makes. There is little doubt that an American tax reform is necessary, however the scope of which, like most subjects these days, is still up for debate.