AIG, Other Insurers Among Firms to Pay Proposed $90 Billion Tax
Jan. 18, 2010 – President Barack Obama last week announced a plan to implement a federal tax on large financial firms with at least $50 billion in assets and who accepted federal funding to survive the recent financial crisis – although some who declined taxpayer dollars would pay, too.
Corporations responsible for paying the proposed tax would include the American International Group (AIG), the Bank of America, Citigroup, Goldman Sachs and JP Morgan Chase. The tax would be levied over a 10-year period beginning June 30 and accrue an estimated $90 billion over a decade.
President Obama calls the proposed tax the “financial crisis responsibility fee,” which is designed to recoup much of an estimated $117 billion U.S. taxpayers have lost through the federal Troubled Asset Relief Program (TARP), which is a $700 billion fund created in 2008 to relieve ailing corporations like AIG of toxic assets mostly tied to various mortgage markets and largely blamed for the global economic meltdown over the past year. Federal law requires the President to recoup any TARP program funding losses by 2013.
Obama says the proposed tax would recoup lost taxpayer dollars by making only those firms most responsible for the recent downturn and who were primary recipients of taxpayer dollars repay the funds instead of adding to the federal deficit. The tax would levy a 0.15 percent fee on corporate assets while exempting “high-quality capital,” such as common shares, and retained and disclosed corporate earnings. If approved by Congress and signed into law, the Internal Revenue Service would collect the fee over a 10-year period beginning June 30. Only those firms with assets topping $50 billion and who own federally insured depository institutions would be levied.
While AIG was among firms cited as being liable for the proposed federal tax, several other insurance companies also would qualify for the additional levy. Allstate, Ameriprise Financial, The Hartford Financial Services Group, Lincoln National, MetLife, the Principal Financial Group and Prudential Financial all would be eligible for the proposed tax based on each firm’s adjusted assets even though many declined federal assistance, according to a report issued by Credit Suisse on Friday.
Of insurers that accepted federal TARP funds, AIG could owe up to $389 million if the tax is levied. The Hartford would owe about $28.2 million and Lincoln National $29.4 million, according to Credit Suisse.
But firms that declined federal assistance would pay large amounts as well. MetLife would be assessed up to $97 million, Prudential about $85 million and Allstate some $34 million despite none of the insurers having accepted taxpayer assistance, according to Credit Suisse and Citigroup analysts.
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