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Taxing bonuses

Emerson Lynn Jr.

Monday, August 17, 2009

CONGRESS CONTINUES to wrestle with ways to curb bonuses given to executives and high producers in the finance industry. At present only institutions that have received federal bailout money must comply — and they are balking. One defended a $100 million signing bonus as necessary for it to compete.

To argue that any individual can possibly be worth $100 million on his first day at work will strike 99.9 percent of the population as preposterous — and totally unacceptable when the $100 million is taxpayer money that could be paid back to the treasury.

Citigroup, AIG and others respond that they must have high performing “deal makers” to do their trading magic if they are to make the profits they need to recover their standing in the industry and begin to pay back the subsidies they have received from the government.

Possibly they are right. There may be stars in financial trading where the big bucks are made who can make a difference to a big financial firm. They should be hired.

It also seems essential to find a way to change the Wall Street culture.

The U.S. economy is still one of the strongest in the world, despite the recession. The average family does just fine with an annual income of $50,000 to $70,000, depending on various factors. One hundred million is 2,000 times 50,000. It is flat wrong to have an economy in which one man earns 2,000 times the wage of another — and wronger yet when the multiple climbs even higher, and there are millions of Americans who earn $25,000 or less a year.

Congress should be outraged that the industry that was largely responsible for throwing the world’s economy into the worst recession in over half a century is right back at the destructive game of paying enormous bonuses to traders who take enormous risks, setting the stage for the next collapse.

It should express that outrage by restructuring the income tax on individuals and businesses to make it virtually impossible for such bonuses and exorbitant wages to be paid. New income tax brackets should be created that would take virtually all income above, say, $5 million a year — a mere 100 times an average family income.

Businesses should not be allowed to count any compensation above $5 million paid to an individual as a business expense. The definition of income should be broad enough to cover stock options, travel allowances, chauffeured cars, vacation home rentals and all of the other dodges imaginative executives, boards of directors and accountants concoct.

The goal should be to change the corporate culture and to tacitly recognize the value of the work done by everyone else, while, incidentally, collecting enough tax revenue to move the country toward a balanced budget.

Those of a certain age will know that this proposal is anything but radical. The top income tax bracket 50 years ago was 91 percent and kicked in for joint filers at $400,000. A couple earning $44,000 a year back then paid a tax of 59 percent on any additional dollars earned. The celebrated tax cut that President John F. Kennedy achieved still left the top bracket at 70 percent for income above $200,000. Taxing the rich was the thing to do in America when granddad was a young man.

Today’s top bracket is only half the Kennedy level: 35 percent for couples earning $372,950 or more.

Today’s gargantuan incomes for those in the top one-tenth of 1 percent are a relatively new phenomenon. Only a few years ago, heads of corporations earned about 25 times the wage of their line workers (the ones who actually produced the wealth.) That multiplier now is closer to 350.

But it’s mostly the guys and gals who are traders — manipulators is another word — who do nothing that raises the standard of living of the people, who take home wages and bonuses that often exceed the gross annual volume of fair-sized manufacturers.

Measured by what they actually produce, they don’t earn it and the fact that they receive it diminishes our democracy.

Emerson Lynn Jr.

Comments

dalelinn (Dale Linn) says...

Nobody dislikes the outrageous salaries and bonuses more than I do. That said, where are the stockholders? Why aren't they speaking out? Because there's too many of them and they think their voice won't be heard? That sounds familia. Kind of sounds like our out of control federal government. Back to the out of control salaries. Where are the board of directors for these companies? I don't like the idea of our government having more power than it already has. The Constitution is supposed to limit their powers. Our government is as bad as the corporations that pay the outrageous salaries. For starters, I think, the federal reserve needs to be done away with. Goldman Sachs, as an owner has far too much control over our government and country. That woud be a start.

August 17, 2009 at 5:49 p.m. ( permalink | suggest removal )

open_eyes (anonymous) says...

If we speak out we're Nazi's

August 17, 2009 at 5:53 p.m. ( permalink | suggest removal )

justthefacts (anonymous) says...

Well said Comrade. The Bourgeois elite have the audacity to actually perform and enjoy a bonus. The Refuseniks must be stopped.

It is good that big brother is looking out for our interests. Soon we can all share in the bounty that is the collective. Resistance is futile.

August 17, 2009 at 6:04 p.m. ( permalink | suggest removal )

reddog (K. B. Thomas Jr.) says...

Go to Goldman Sachs 666.com and listen to William Black who goes in depth on the biggest theft in world history. This web site is the leading source of news information, comments, opinions and facts about the darker side of Goldman Sachs.

August 17, 2009 at 8:14 p.m. ( permalink | suggest removal )

reddog (K. B. Thomas Jr.) says...

Go to Goldman Sachs 666.com. This site says, these gangsters make the mafia look like pre---schoolers.

August 17, 2009 at 8:39 p.m. ( permalink | suggest removal )

reddog (K. B. Thomas Jr.) says...

Bill Black was litigation director of the Federal Home Loan Bank Board and Deputy Chief Counsel during the S and L crisis of the 1980*s. Please listen to his 1 and a half hour video. He wrote a book called The Best Way to Rob a Bank is to Own One. Paul Vockler praised his analysis. Folks, one brave man with a conscience can stand up for us all.

August 17, 2009 at 10:49 p.m. ( permalink | suggest removal )

reddog (K. B. Thomas Jr.) says...

Go to William Black University of Missouri. Then go to Bill Moyers Journal. William K Black: CS Bailout PBS.

August 17, 2009 at 11:27 p.m. ( permalink | suggest removal )

reddog (K. B. Thomas Jr.) says...

William K Black: Oh, Bernie Madoff was a piker. He does not even get into the front lines of a ponzi scheme, compared to the big banks.

August 18, 2009 at 12:26 a.m. ( permalink | suggest removal )

reddog (K. B. Thomas Jr.) says...

All told, the bonus pools at the nine banks that received bailout money was $32.6 billion, while those banks lost $81 billion.These bonuses should not have been paid at all while the banks were receiving government aid, according to compensation experts.

August 18, 2009 at 1:16 a.m. ( permalink | suggest removal )

reddog (K. B. Thomas Jr.) says...

In Deception and Abuse at the Fed, Robert Auerbach, a former banking committie investigator, recounts major instances of fed mismanagement and abuse of power that were exposed by Henry Gonzalez, including: Blocking congress and the public from holding powerful officials accountable by falsely declaring for 17 years that they had no transcripts of its meetings; manipulating the stock and bond markets of 1994 under cover of a preemptive strike against inflation; Stonwalling congressional investigations and misleading the Washington Post about the $6300 found on the Watergate Burglars. Henry Gonzalez. former head of the banking committee said, the Federal Reserve should not be allowed to operate with the secrecy and independence in which the Federal Reserve has shrouded itself. Ron Paul has about 286 sponsors to for the first time in history to audit the Federal Reserve.

August 18, 2009 at 3:13 a.m. ( permalink | suggest removal )

create (anonymous) says...

Here is where my fellow liberal thinkers and I part company. While I do believe that the banking industry deserves and should get more scrutiny than it gets now, I also believe that in a free market system, individuals should be allowed to earn as much money as they want. However, they should be taxed accordingly. That is fair.

See open_eyes, there's a kink in my liberal armor.

Mr. Linn says, "The average family does just fine with an annual income of $50,000 to $70,000..." Maybe that's true around here, but that isn't true in many areas of this country where the cost of housing for example is through the roof. If I were to take my house as it stands right now, a central Emporia frame Victorian, and plunk it down in San Francisco or Honolulu or San Diego, or parts of New York, I couldn't afford to even look at it.

dalelinn asks, "...where are the stockholders?" As long as they're making money, they're not going to say one word. That's why Bernie Madoff got away with his ponzi scheme for so long. Nobody questions making money when he's the one making it.

As I was reading Emerson Lynn's piece, I couldn't help but plug in the salaries of top name sports figures who make millions upon millions, their lavish lifestyles and ugly after-game activities making constant headlines. And where are those stockholders? Oh yeah, they just keep buying those tickets don't they?

Calm down, sports fans, what about rock stars?

And so what if manufacturers make the big bucks. Aren't they taking the big risks? Aren't they having to keep their factories open, pay the utilities, buy the supplies, fix the mechanical breakdowns, keep the plumbing in good order, and on and on and on? Joe Six Pack just goes to work everyday and picks up a paycheck at the end of the week. His concerns don't include keeping the doors open.

August 18, 2009 at 7:51 a.m. ( permalink | suggest removal )