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    Taming the Fat Cats
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    Published: December 19, 2009
    President Obama seems genuinely, if belatedly, upset about the way America’s voracious bankers leveraged hundreds of billions in taxpayer bailouts to line their pockets with multibillion-dollar bonuses while American businesses starve for credit.

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    Before he gets over his anger, he might want to take a look at how the British found a way to realign the fat cats’ boundless greed with the public interest: slapping a hefty windfall tax on their bonuses. He still has time to push Congress to enact a similar levy here.

    Bankers have rushed to repay their bailout loans to the Treasury so they can avoid the constraints on compensation that came with the assistance. Unshackled, they are putting together bonus pools for 2009 that would rival the record-breaking packages of 2007 — the year before their foolhardy bets tipped the world into its worst economic crisis since the 1930s.

    The administration can make a very good case that the Treasury is entitled to much of this money. After all, what profits the banks have made over the last year were funded by oodles of cheap financing provided by the Federal Reserve. This is a windfall that they should not be allowed to keep.

    We can think of a lot of good ways to use the revenue from a windfall tax, starting with a more robust program to create jobs for out-of-work Americans.

    The British government expects to make nearly $1 billion from a 50 percent tax on bonuses above about $40,000. While this is not much, the financial sector in the United States is much larger. Moreover, a tax just might persuade banks to cut their bonuses and use the money to bolster their capital, which would make them more financially secure.

    Bankers are likely to scream — threatening to leave the country and arguing that such narrow taxation is unconstitutional. The best in the accounting business will undoubtedly be tasked with coming up with strategies to avoid taxation, by pushing bonuses back in time or with other ruses. No one should be intimidated.

    Threats to move overseas are empty. London is out of the picture. The French president, Nicolas Sarkozy, has said he would follow the British lead. Germany and other countries could be persuaded to impose taxes of their own. And it would make little sense for bankers to move halfway around the world to Singapore to avoid a one-off tax that would not affect future bonuses.

    Congress also has time to pass a tax on 2009 bonuses because most are expected to be paid in 2010. And the constitutional ban of bills aimed to punish a specific group — so-called bills of attainder — is unlikely to apply because a tax would not be aimed to punish named people but an economic class.

    A windfall tax on bankers’ bonuses would not be enough, but it would be a start. The government also needs to ensure that all banks reform their compensation practices to better align rewards with performance, good and bad. That is the best hope for curbing bankers’ unbridled appetite for risk.
    What I don't understand is why Union signing bonuses are taxed at 38percent and these bonuses aren't? A bonus is a bonus is a bonus. What a regressive system. From NY Times
    Where free unions and collective bargaining are forbidden, freedom is lost.”
    ~Ronald Reagan

  • #2
    Originally posted by Roosveltrepub View Post
    What I don't understand is why Union signing bonuses are taxed at 38percent and these bonuses aren't? A bonus is a bonus is a bonus. What a regressive system. From NY Times
    That gives you an incentive to move up to management.
    "Only Nixon can go to China." -- Old Vulcan proverb.

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