WSJ is advocating … taxes? Topsy-turvy bailout world. - July 19, 2009

The Baseline Scenario has an interesting post about how a recent Wall Street Journal editorial advocates taxing companies that receive ongoing support from the federal government because they’re deemed Too Big to Fail.

It’s not that the Journal has suddenly embraced corporate taxes. It’s that they want to discourage the use of taxpayer funds for risky activities in which taxpayers can’t benefit proportionately. While conservatives (and generally conservative media like WSJ)would more typically argue that taxes are damaging in part because they’re a market distortion, in this case they’re arguing that taxes might be a way to adjust for a market distortion — i.e., the significantly un-level playing field created by allowing some big financial players to take on high risk-high reward activities while passing the risk on to taxpayers (but not the upside reward).

The Journal points out that Paul Volcker has argued for these kinds of disincentives to outsize growth on the part of financial companies, only to be outshouted by Tim Geithner and Larry Summers. Is this further proof that the inmates are running the asylum — i.e., that the big financial players have so much influence with the government entities tasked with their oversight, in effect there’s no appetite for meaningful measures to prevent future crises?

What do you think?

View All Articles