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Cyprus, a small Island country on the Mediterranean Sea, has been making headlines recently for considering taxing private saving accounts to help with their debt crisis. In response, Congressman Billy Long of Missouri has proposed a resolution urging Congress to refrain from such considerations. KSMU’s Shannon Bowers has the details.
After a two hour debate Tuesday, Cypriot politiciansunanimously rejected the Bank Tax Bill proposed by The European Commission, The European Central Bank and the International Monetary Fund.
With this ongoing financial crisis in Cyprus, Representative Long of Missouri’s 7th District, introduced House Resolution 129 expressing to Congress that they should refrain from considering or adopting any legislation that would tax or confiscate personal savings held by the American people.
Dr. David Mitchell is the director of the Bureau of Economic Research at Missouri State University. He explains the country of Cyprus has become undercapitalized. For example, their banks have made loans of $200,000 for homes that are now worth just $100,000. So only half of the money lent will be made back.
The danger is not that they are going in and taking the money, it is that they are changing the rules of the game, Mitchell said.
“The ECB said ‘we are only going to do this one time; we will never do it again.’ But once you have already done it once, you know they can come back and do it another time. So you could actually see your financial sector still weakening because people would be afraid to put their money in the bank,” said Mitchell.
He said that while he doesn’t think the United States would ever pass the taxing of private saving accounts, it is better to get it down on paper. Congressman Long says he’s happy to lead on this issue.
“Europe is a first world area, and so it’s not like some third world country came up with this idea to go in and tax people’s money that is sitting in their saving account to bail out the financial institution that it is sitting in,” said Congressman Long.
Specially, the resolution includes individual retirement accounts, 401K plans, certificates of deposit or other personal savings. Congressman Long says this resolution is necessary to raise awareness.
Currently, politicians in Cyprus are busy coming up with an alternative plan to stave off the collapse of its banking sector. Visit KSMU.org for the language of House Resolution 129.
For KSMU News, I’m Shannon Bowers.