The House of Representatives just passed by a vote of 328-93 a law to tax bonuses at a 90% rate for employees that work at corporations that have received $5 billion or more in bailout funds. The bill is retroactive to the beginning of 2009 and does not apply to people making less than $250,000/year. The Democrats voted for the bill, 243-6. The Republicans voted against, 85-87.
The bill needed a 2/3rds majority to pass because it involved a suspension of the rules. But it passed fairly easily. I don’t know if the Senate will follow suit or if they will introduce something substantially different.
I am kind of enjoying the return of 90% marginal tax rates. I don’t think we should go quite that high in general, but something between 50% and 70% would be reasonable, depending on the loopholes. The fewer the loopholes, the lower the rate can be. There’s not much point in paying out huge bonuses if the government gets to keep 70% of the money.
If something like this passes the Senate, I’ll be surprised.
I suspect that somehow, someone in the Senate will figure out a way to tie this up anonymously until everything “blows over”.
If the bill is well crafted, I like the idea. It’s actually a decent policy, though I’d lower the bailout funds requirement to $1 billion myself. And actually, for really good policy you’d include a hefty tax on people making more than a set amount in total earnings from the company, not just go after the bonuses.
But as a compromise, this is actually not a bad idea at all. I was worried from the sound of things that our Congresscritters would come up with something really knee-jerk stupid that wouldn’t meet the “Bill of Attainder” requirements.
(I do wonder if a sympathetic court might not throw out the retroactive portion, though – any tax lawyers out there know whether this might meet Constitutional muster or not?)
To add, I’m curious about the Republicans who voted for the bill. This goes against they’re usual ethic of “never vote in favor of a tax ever” and so I’m wondering who they are.
I wish that the roll call vote that they give online would tell us party and state/district in addition to the names. Anyone know of a good resource for that other than looking them up one by one?
Democrats in roman; Republicans in italic; Independents underlined
You know, someday I will learn to read.
In fairness, though, they did fool me by putting the key to the whole thing right there on the second line where only an idiot could miss it…
I’ll be surprised as well.
Our “House of Lords” senate is not really about equitable taxes for their millionaire masters. that, or whatever is passed in the end will be SOOOO full of loopholes for corporations as to make it useless.
Since AIG and several other
mafiafinancial institutions are now owned by the government, why can’t the government set the compensation for its own employees without bothering with laws like this?The retroactivity seems likely to assure this will be tied up in court for the foreseeable future, yet without the retroactivity it’s pretty much irrelevant.
Boo, if a 91% marginal rate was good enough for your beloved Eisenhower, why isn’t it good enough for us? The time has probably never been better to put an end to the income gap through a return to a fair tax policy — but this time without the loopholes. If the myth that the “brilliant” corpocrats deserve this kind of pay isn’t dead yet, it never will be. The unmasking of the “merit” system has reached epic proportions.
because when we had 90% rates we also had loopholes you could drive a truck thru. When Bill Bradley lowered the rate to 35% in 1986, he actually increased revenue. A 70% rate w/o loopholes would be better than a return to Ike’s rates.
Since AIG and several other mafia financial institutions are now owned by the government, why can’t the government set the compensation for its own employees without bothering with laws like this?
Because this gets around a lot of messy obligations and contracts that would otherwise have to be teased apart and solved via court cases?
Because this is something that Congress can do, and it’s always useful to have the Congress do something to make the voters think it’s worth keeping them around?
Because the person who would have to do it is probably Tim Geithner, and he doesn’t seem to have the inclination to do so?
Because politics in the US is a weird animal, and all sorts of things are done the “wrong” way to get the “right” result?
Anyway, I stand by what I said above – this is actually a step towards good general policy. If we’re bailing out companies with billions of dollars, their executives should have a salary cap and a bonus cap. Period. I’d actually set it much, much lower than I’m sure Congress would be comfortable with (i.e. total compensation for anyone at the company shall not exceed the yearly salary of the POTUS. Done.)
The fact that Congress has only started to figure this out after the fact, and that they should have actually done it when the bailout provisions were passed in the first place, is annoying but not at all surprising to anyone who has watched our government operate for any length of time. (And I’ll lay you odds that we’ll get some Congressperson who opposed compensation limits THEN but is in favor of them NOW coming out and saying something stupid like “I never thought they’d be this greedy/foolish.” I can say this with near certainty because that’s what they ALWAYS say when faced with the inevitable result of said Congressperson’s stupid actions. In fact I haven’t looked, but I wouldn’t be surprised to find out that someone has already said it.)
I’d like to see a rule that the top compensation in any company would be limited to 15% of the lowest rate paid to employees. That would mean that a company that paid minimum wage ($7.25 starting this coming July)to any employee would have to cap executive pay at $226,200. If a CEO wanted to increase his salary, he’d have to increase the pay of his employees. And as long as I’m dreaming, I’d like to see companies required to pay a penalty equal to the employer’s share of social security & medicare on any wages paid out in other countries.
I actually think a salary cap like that should be “best business practices” for a publicly traded company. Setting executive compensation based on what the grunts who do the actual work make is just common sense, and gives you a metric by which to tell if your executives are overpaid or not.
You’d think shareholders would be all over something like this – it means more money stays in the company which can be reinvested or paid out in dividends. Unfortunately, it probably needs some kind of legal implementation because all it takes is for one company to decide that they’re breaking the cap to headhunt a talented CEO and the whole thing blows up.
(I wonder what people who froth at the mouth – one way or the other – about salary caps in sports would think about salary caps on CEOs. The dynamics are pretty much similar, except instead of the money saved going into an owner’s pocket, it goes into the shareholders’ pockets one way or the other. Hmm.)
Yes — or 15x the minimum wage, even better. Otherwise you’d have companies hiring “contract workers” for all the low-pay stuff and only paying directly for the exec classes. Rather than telling companies what they can pay, however, I’d use the tax system:
Excellent ideas. I like the linkage to the minimum wage. That would create some awesome legislative fights over the years. It could drastically change the debate; our collective interests would be more intertwined.
Michael McMahon, D-NY13 (Staten Island/Brooklyn) Rep voted against the tax.
My theory is that a lot of Wall Streeters live on Staten Island, and McMahon knows who butters his bread.
Usual suspects I see voting no: Michele Bachmann, John Boehner, The Odious Patrick McHenry.
Interestingly enough, my GOP Congresscritter Geoff Davis voted to indeed Stick It To The Man, even with all the Cincy banking suburbs/exurbs round here.
what’s to stop these firms from just giving raises equal to what they woulda got with salary + bonus?
there’s nothing to stop that, since Congress doesn’t really believe in doing their constitutionally mandated
jobs, i.e. regulating commerce.
What surprised me was the AIG CEO saying he hated giving out the bonus checks, tooo. A real CEO would have also given them an envelop with their pink slip.
The AIG bonus is the have mores wanting more and getting away with it. Would it not be easier to just Nationalize any company that contemplates a bonuse?