WILFORD: Nationalizing Credit Card Companies — Liberals’ Latest Great Idea


Andrew Wilford Contributor
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In their zeal to build up government and tear down private businesses, some progressive activists have taken to calling for greater taxation and regulation of a wide swath of industries. It’s a tale as old as time, but some are adding a twist.

Last week, Matthew Stoller, a fellow for the so-called “Open Markets Institute” tweeted:

The best thing Dems could do for small business is to nationalize the credit card companies and reduce the fee merchants have to pay to zero. There’s a 3-5% private tax flowing from every retail business in America to VISA/Mastercard/AMEX. #NationalizeVISA

There are numerous problems with this idea, even setting aside the idea of “open markets” advocates calling for government takeovers of a private industry. For one, Stoller referred to a 3 to 5 percent “private tax” that retailers pay credit card companies — an interesting terminology for the cost of the service that credit card companies provide.

Since he believes that retailers should not have to pay any fee, the cost of operating this service would be borne by taxpayers. Instead of retailers and customers paying for something that they directly benefit from, you would be paying for it instead. In other words, the “private tax” he referred to would become a real tax paid to government.

And that cost would not be insignificant. American Express alone had operating expenses in excess of $28 billion in 2017, and while AmEx operates in other countries as well, there are ten other credit card companies with ten million or more cardholders. Make no mistake: nationalizing an industry of this scale would instantly create one of the largest single government programs in existence.

But the subtext of the tweet is a general misconception about credit card companies that has become pervasive among many on the left — the idea that credit card companies provide a service that is valueless, even predatory.

Thus, the “swipe fees” that credit card companies charge retailers each time a customer swipes one of their cards is seen as an offensive leeching off of retailers and customers. Look no further than efforts by retailers, often backed by liberals, to curb swipe fees and impose court orders allowing retailers to bypass credit card companies’ rules requiring them to accept all cards from a given credit card company (preventing them from picking and choosing certain cards from Visa to forbid, for example).

But imagine the alternative. A single, government-run, taxpayer-financed credit card company would eliminate numerous consumer advantages. The status quo where credit card companies compete with each other by offering ever-greater rewards benefits would not exist. “Five percent back on purchases” and airline miles would be replaced with the taxes you pay for an inevitably less reliable government-run service.

Our bumbling federal government can barely keep the lights on, much less operate massively complex payment processing systems. Nationalizing credit card companies would be a disaster for retailers and their customers — not to mention American taxpayers.

Andrew Wilford is a policy analyst with the National Taxpayers Union Foundation, a nonprofit dedicated to tax policy research and education.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.