We have seen: for industries with big capital requirements or heavy regulatory frameworks (enacted for everyone's safety), it just doesn't.
The article reports the effort as a "surprise tax".
If we pass these windfall taxes and then use that money to help individuals who are struggling, those individuals then benefit; however, if we let all that money to go to the millionaire/billionaire shareholders, then there's a chance that, instead of adding it to the excess wealth they're already hoarding, they might decide to spend it on business or projects that they could already have afforded but didn't. Those businesses or projects could then theoretically create work opportunities which would then employ some more people, and maybe some of those people would be the people who are struggling, and maybe the pay would be a bit better than the market rate they're already getting paid for their labor for some reason and so they'd get paid a bit more, and maybe that would help them to struggle less. Didn't you ever think of that?!
You could think this is good as it supports people but I think it's kind of sad thousands of people get up and go to work every day with no impact on anything,just waste away at a desk. This doesn't even mention the economic waste
So, basically, result of a status competition that comes from misalignment between the interests of the company and the interests of individual managers.
But when times are tough you start making riskier jobs because you just don’t have the funds to support bullshit jobs.
> If one wants free enterprise and reap its benefits
who wants this from banking???
> one has to allow high profits for companies and see if competition takes care of the "problem"
ah, yes - we've seen this work so many times before!
You get that through competition for my deposits.
It's wild to imagine complaining about them being taxed but few complained about bails out from tax payers.
I certainly do. I like have lots of choices and banking is important to me. I also like innovative new banking products. I wish there was free enterprise in banking, it seems like we have an oligopoly, in the US at least.
What is it then?
I think it's a clear sign that competition doesn't work and savings were not passed to consumers. The thesis that competition will work eventually reeks of trickle down economics.
Such tax is just punishment for the lack of competition. It sends a message that if you are not going to compete for the customer then you can't keep the profits gained from your reluctance to compete.
The competition only works if competitors are willing to give consumer a better deal, and if moving between competitors is easy enough.
But if they decide "well, media say there is inflation so we have excuses to rise prices far higher than actual rise of costs", well...
1- Windfall tax 2- Elimination of banking license regulations
What do you think would be their choice?
They would choose (3) "pay money to lobby for none of the above" and instead lobby congressmen/deputies, to eliminate this question
And how many de novo banks have there actually been in any country recently? In the US, the land of plenty (banks), there's been one in the last twenty years.
Bloomberg's Odd Lots podcast just had an episode on this (including the topic of de novo):
* https://www.youtube.com/watch?v=8lPFHWgxq5c
Banking is low margin, and it takes decades to get any kind of return: few, if any folks, have the patience for that kind of ROI when there are alternatives.
That is, after all, how interest rates work. We 'tax' the mortgage payers and give it to deposit holders to hold as a store of value. That reduces the transaction rate.
So if we tax corporate profits and redistribute it around, then interest rates have to go higher to force the money released from the corporate profit store, to the deposit holder store.
If prices are too high, the solution is to encourage the capitalisation of more competition, not encourage keeping money in the bank.
1. Investors invest for speculative returns, not predictability or risk minimisation.
2. Free enterprise is possible within existing political-economic frameworks.
One must just glance at the US to see what happens, the high profits get used to lobby politicians to make competition impossible, thus the problem doesn't get solved and becomes the status quo.
Permanent high taxes are better than unpredictable windfall taxes.
It's very difficult to budget for the future when you don't know how much tax you're paying by a binary order of magnitude. When industry specific, it can create perverse incentives for outsourcing.
Banks will do just the same that all megacorps do: buy up their competitors with all the excess profit to make even more profit.
Also, I’m in Europe and my bank gives me better deals on savings than any American bank offers.
I sometimes wonder if perhaps other parts of the world have a different vision of how to run their economy. Surely "free enterprise" isn't a universal rule and certainly not the way it is conducted in North America. Maybe they're just doing things differently?
1. This is objectively false. Shareholders of the bank suffer, because they get less profits. This may not be a crowd that solicits a lot of sympathy, but they still exist.
2. How do you feel about VCs and startups? Their entire business model is investing in 100 companies, knowing that 99 will fail but 1 will make astronomical returns. How would this work if there were windfall taxes?
Just because it's called a windfall tax does not mean it only effects windfalls. This is really just a "surprise extra tax". Plenty of people said that rising interest rates would mean more risk but also more profit for banks. Now they have taken the risk they're being told the profit is not theirs...
Surprise laws should bother you on general principles.
Tax unpredictability, high taxes, or capping profitability is a great way to scare off businesses from operating in your jurisdiction.
Regulation that increases competition would be even better. It seems like that would be the underlying problem.
It's entirely technologically possible for central banks to take over retail banking at this point and Brazil has demonstrated nicely that taking over payment processing would be a net improvement for everyone. Honestly, I don't understand why we haven't done it already but I suppose entranched interests are partly to blame.
It seems hard to do without reducing requirements for cash on hand which, which can be a disaster.
I'm not sure what the banking market is like in Italy, but in the US it's trivially easy to find banks that pay close to or above fed daily funds rates[1]. Sure, your average main st or wall st bank might still be paying 0.1% interest, but there isn't exactly lack of competition either.
[1] first result on google: https://www.bankrate.com/banking/savings/best-high-yield-int...
Significantly less competitive than in the USA.
If the banks are doing something predatory then that behavior should be stopped. Not being able to define it and then seizing an arbitrary portion of the profits isn’t going to stop it in the future. Hell, since profit is after expense, they can increase CEO salaries to reduce it and be taxed less!
Plus if the “crime” here is fleecing depositors with interest rate spreads, they should make them pay that arbitrary percentage to each depositor based on their pro rata share over the coarse of the year.
Otherwise you’re taking some pensioners’ low savings account interest and giving it to away to someone else entirely.
The problem is that these companies do receive subsidies during lean times, in both energy and banking fields, whether you want it or not. They are too important to be let to fail, and the governments will either subsidize them, bail them out or just plain nationalize them. In the case of Greece banking crisis, they nationalized the losses of foreign banks...
So a windfall tax makes sense in these industries, maybe in others too.
Utilities are similarly bailed out, because what are you going to do, leave people without water and electricity?
If we have risk floors, we should also have profit ceilings.
[1]: https://wgme.com/news/local/are-private-or-public-electric-u...
Wouldn't redistributing these profits back to mortgage holders just undermine the raising of interest rates in the first place?
But these high bank profits could indicate that the high rates have not been passed on to saving accounts.
One issue in Europe is that there is no easy way for consumers to access the high interest rates with their available cash. While the US government has an online portal for consumers to buy state debt directly.
Main reason high interest rates reduce inflation is that they disincentivise taking new loans and each new loan take is new money printed. So higher interest rates is just putting breaks on money printing.
Money is a stock. It's the flow of transactions that matter for inflation, and that just increases - as we see from increased credit card lending, and increased trade credit in business (which is the commercial equivalent).
Higher rates just means higher prices, which then leads into higher wage demands.
There is no control until the money becomes 'dead' - saved by people who already have money.
Which funnily enough the banks were doing before they got taxed...
To curb inflation, the windfall (interest rate) taxes should be burned.
No, because we assume the profits will be reinvested.
How does a bank efficiently re-invest? Does taking profits mean efficient reinvestment? I dont think so. It just means inflation.
Windfall taxes just grow the big government. More cost to be directly passed on to consumers at the end of the day.
If we don't like capitalism, why not just say we want to ban usury and be done with it?
For me, this line of thinking usually ends with: If you can't beat them, join them. As Adam Smith Founding Fathers, and people at the top everywhere would have hoped. Time to get off Hacker News and make my profits soar.
Banks that have more money then they need for operation just indulge more in gambling.
Of course progression needs to be based not only of the profits of a given corporation but also all of the subsidiaries down the chain of ownership.
Grocery monopoly and corp profits.
Housing "affordability" means "lowering requirements, giving tax break for first time buyer" ...
It's not the kind of "Affordability for the people" that one expect.
Max profits for BigCo (Bank, the rest, same) and lower the wages for the people seem to be the M.O. these days.
I'd love to see higher Corp tax that is spread to people. Force higher tax and give tax break to force them spread their profit to their employers would be one example that is beneficial for everyone.
Does that mean Italy just took away some of my retirement? Shouldn't we be outraged?
