Yesterday, I wrote about a problem I see looming for a non-bank resolution authority: the creation of a fund used to resolve big financial firms may give them a competitive advantage over smaller ones. The sort of obvious rejoinder to that criticism is that banks will have to pay into the fund, thereby incurring a cost that could serve to remove that competitive advantage. The New York Times notes that such bailout taxes are gaining support. I don't think they'll help matters much.
I don't want to split hairs here. Whether you call it a "tax" or an "assessment" really doesn't matter. If you're forcing firms to pay a certain amount of money into a fund used to pay for the costs that would hit the U.S. economy if those firms fail, then the end result is the same. So even though the financial reform proposals out there don't create any sort of punitive tax, they do require that big firms are assessed to pay into a resolution fund, proactively. Same thing.
The problem, however, is that this tax won't level the playing field: these firms will still have a distinct advantage for two reasons.
First, the cost associated with failure might be more than the amount of money any given firm has been individually assessed. But the entire fund (or even more) can be used to pay the cost of a single firm's failure. So whatever parties were doing businesses with that firm and receive money from that fund to cover the costs of resolution could potentially reap more benefit than any given firm paid for. That means the cost incurred by a firm could be less than the benefit derived. On an industry basis, the total cost may be equal to or greater than the benefit, but from the competitive standpoint of individual firms, any given systemically regulated firm will have an advantage in luring customers because of this special benefit.