[madballster]

This is an old European disease. Corporate profits are often seen as an adverse result; of consumers being taken advantage of unfairly. Taxing excess profits beyond what are already high tax rates is popular amongst voters (e.g. see poll results in the UK, 2022). However, this lowers the appeal for new entrants to enter these markets to compete for these excess profits through better and more efficient products and services. If one wants free enterprise and reap its benefits one has to allow high profits for companies and see if competition takes care of the "problem".

[toyg]

> see if competition takes care of the "problem".

We have seen: for industries with big capital requirements or heavy regulatory frameworks (enacted for everyone's safety), it just doesn't.

[gwright]

Irrespective of the the benefits and/or feasibility of competition to bring prices down, the larger problem with this ad-hoc windfall profit tax is that it is ad-hoc. This is changing the rules after the game has started.

The article reports the effort as a "surprise tax".

[jntvjnvutnuvt]

Which industries with big capital requirements don't have competitors?

[concinds]

Your assumption, that if without these extra taxes, more banks would be created and the industry would become less concentrated, seems untrue. The banking industry seems to be becoming hugely concentrated in every Western country, regardless of windfall taxes.

[danudey]

The opposition to these extra taxes runs surprisingly parallel to trickle-down economics.

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?!

[rightbyte]

Maybe the tax could be progressive to help smaller players? I dunno why only wage tax is progressively taxed.

[a-user-you-like]

Thanks to excessive regulation

[bko]

I think that's correct. I have a theory about bullshit jobs in highly regulated or profitable industries. Places like Google have a ton of employees that don't contribute anything but make work projects. Why don't they just cut the workforce in half? Because their profit margin would be too high. It's already 25% with all the bloat. Imagine if their profit margin shot up to 50%? They would likely be dragged in front of Congress to explain themselves. It's even more true for banks (who i would argue have even more bullshit jobs where people literally do nothing)

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

[bushbaba]

Bullshit jobs are encouraged for management to grow their org into a promotion. These companies are growing so nobody really questions the bloat as making the wrong move might impact future growth (or cause your action to be blamed for growth miss).

[inglor_cz]

I think the other HNer is closer to the truth: in a bureaucratic organization, the more people you manage, the more important you are.

So, basically, result of a status competition that comes from misalignment between the interests of the company and the interests of individual managers.

[prepend]

I’ve wondered this too. I don’t think it’s conscious so much as it’s unclear exactly what jobs are bullshit. So when profits are high, there’s more leeway to allow jobs that you’re not quite sure.

But when times are tough you start making riskier jobs because you just don’t have the funds to support bullshit jobs.

[danudey]

I'm in my 40s now, and would be pretty content to get up and remote to work every day with no impact on anything. Let me save that energy up for my family instead.

[webdood90]

I didn't think it was possible but banking shills apparently exist

> 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!

[bko]

I don't know. I kind of like competition in banking. I like free checking, ATM fee reimbursement, better customer service, better websites and apps, better alerting etc.

You get that through competition for my deposits.

[bilekas]

It's seems people have forgotten what the banks did in 2007 and before.

It's wild to imagine complaining about them being taxed but few complained about bails out from tax payers.

[prepend]

> who wants this from banking???

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.

[jntvjnvutnuvt]

We have seen that work many times actually if you know anything about economics and capitalism.

[tensor]

Unfortunately the old American disease of not ensuring competition and instead passing regulation ensuring monopolies stay in power means the "problem" is not actual solved, and is in fact made worse.

[zmnd]

> The US is home to over 4,700 FDIC-insured banks. It’s not far off from the EU, which has 5,171, but stop and consider that the EU consists of 27 countries. The UK currently has 365 banks, and Canada has 83

[scotty79]

> Corporate profits are often seen as an adverse result; of consumers being taken advantage of unfairly.

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.

[ilyt]

Well, exactly right.

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...

[IG_Semmelweiss]

If banks would be forced to choose between:

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

[TomK32]

Wikipedia doesn't list many, but the USA had one in 1980. Surprisingly the US oil companies have survived this https://en.wikipedia.org/wiki/Crude_Oil_Windfall_Profit_Tax_...

[throw0101a]

> However, this lowers the appeal for new entrants to enter these markets to compete for these excess profits through better and more efficient products and services.

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.

[ABCLAW]

Retail banking is low margin high volume, but a bank's CMG or IB divisions are NOT low margin operations. Trading desk margins vary depending on the strength of the group and the clientele. If you're a primary desk for a trillion dollar AUM entity, you make a very pretty penny off your Bloomberg terminal subscription.

[neilwilson]

I'd go further than that. Corporate profits become stores of value. The money stops moving, which reduces the transaction rate and lowers inflation.

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.

[Biologist123]

The final sentence of this comment requires at least two underlying assumptions to hold true:

1. Investors invest for speculative returns, not predictability or risk minimisation.

2. Free enterprise is possible within existing political-economic frameworks.

[Hamcha]

> If one wants free enterprise and reap its benefits one has to allow high profits for companies and see if competition takes care of the "problem"

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.

[spacebanana7]

> This is an old European disease.

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.

[dinkblam]

fully agreed. if you look at e.g. California, those European diseases might start to infect the USA too...

[mschuster91]

> If one wants free enterprise and reap its benefits one has to allow high profits for companies and see if competition takes care of the "problem".

Banks will do just the same that all megacorps do: buy up their competitors with all the excess profit to make even more profit.

[solumunus]

Spoiler: it doesn’t.

Also, I’m in Europe and my bank gives me better deals on savings than any American bank offers.

[niux]

What bank are you using?

[polishdude20]

But like, you can use those profits before they get taxed to pay your workers more and invest in more and better equipment and tooling. So you can lower your tax bracket by providing a better service anyways.

[ilyt]

Well unless the companies decide to just not compete on price and keep it high, see the fuel prices in EU.

[ilrwbwrkhv]

And that is why so many british businesses incorporate in the virgin islands or cayman.

[fock]

which could easily be visited by a landing ship full of guardia di finanza. If the corrupt british regime would not offer protection for services rendered...

[bastardoperator]

TIL not being a capitalist is a disease.

[barbazoo]

> If one wants free enterprise and reap its benefits one has to allow high profits for companies and see if competition takes care of the "problem".

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?