Chutzpah or Desperation?

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The finance lobby is hard at work:

Wall Street’s main lobbying arm has hired a top Supreme Court litigator to study a possible legal battle against a bank tax proposed by the Obama administration….Executives of the lobbying group, the Securities Industry and Financial Markets Association, wrote that a bank tax might be unconstitutional because it would unfairly single out and penalize big banks, according to these officials, who did not want to be identified to preserve relationships with the group’s members.

The message said the association had hired Carter G. Phillips of Sidley Austin, who has argued dozens of cases before the Supreme Court, to study whether a tax on one industry could be considered arbitrary and punitive, providing the basis for a constitutional challenge, they said.

Paul Krugman calls this chutzpah — which it certainly is — but what I’m curious about is why they’re wasting their time on this. A tax on one industry might be considered arbitrary? The United States has loads of excise taxes that fall on individual industries. It might unfairly single out big banks? There’s no constitutional bar to progressive taxes — and in any case, there are lots of compelling policy reasons to focus on big institutions. Beyond that, the federal government generally has lots of leeway both in tax policy and banking regulation. The tax would have to be way, way out of line before the Supreme Court would be likely to strike it down.

That’s my amateur opinion, anyway, which is worth exactly what you just paid for it. But I’d sure like to hear from someone more knowledgable about this stuff. Is this idea as cockamamie as I think it is? Or might they really be able to make a case? And why bother fighting such a minuscule levy anyway? They should be celebrating for getting off so easily.

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