Tax the fuckers

[samtheeagle]

Congress -- You say that you can't recapture those obscene bonuses paid with our money to bankers who helped ruin our economy? Pshaw: here's a bill that I wrote in five minutes. If I could write it in five minutes, your tax experts can do better in ten. Stop posturing and feining powerlessness, and just pass it.



1. The income tax liability of any person who received or shall receive in any tax year any bonus to compensation or increase in compensation greater than the lesser of ten thousand dollars or ten percent of his or her theretofore established compensation from any business entity funded in whole or in part in such tax year by funds dispersed from the Troubled Asset Recovery Program shall be increased for such year by seventy-five percent of the excess amount of such bonus or increase.

2. Notwithstanding any other provision of law, for any business entity that has received or shall receive in any tax year funds from the Troubled Asset Recovery Program and that shall pay in any such tax year to any current or former employee, director or officer any bonus to compensation or increase in compensation greater than the lesser of ten thousand dollars or ten percent of his or her theretofore established compensation, the amount of such excess bonus or increase shall be treated as corporate income pursuant to section sixty-two of the Internal Revenue Code and such entity shall be liable for a corporate income tax for such year equal to one hundred percent of such excess bonus or increase.

3. Notwithstanding any other provision of law, the Department of the Treasury shall pay over to the Troubled Asset Recovery Program all taxes collected pursuant to sections one and two of this act.

4. Any business entity that shall be delinquent in remitting the taxes specified in section two of this act shall be disqualified from receiving funds from the Troubled Asset Recovery Program until the Secretary of the Treasury shall certify in writing to the Congress that the chief executive officer or officers, chief operating officer or officers, and chief financial officer or officers of such business entity have been severed permanently from such entity and that the successor officers thereof have entered into a binding and enforceable stipulation with the Secretary timely to pay such taxes, in addition to any interest and surcharges otherwise assessable pursuant to law; provided that such stipulation shall provide that such tax delinquency are secured by the assets of the corporation and, notwithstanding any contrary provision of the bankruptcy code of 1986, as amended, the United States as creditor thereof shall be senior to any and all other creditors of such entity until such delinquency shall be satisfied.

Comments

[batdina.livejournal.com]

I love you!

[bsdinobaby.livejournal.com]

I really love the argument that "without the huge bonuses, these 'talented' individuals will exit the industry and we'll lose their expertise!"

In some cases, these people ran companies into the dirt. Maybe they SHOULD exit, and let people with a) lower salaries and b) less... uh... greed? take over.

[(Anonymous)]

I know it is really popular to dump on the "fat cat" bankers, but I hope you understand that for some of these people, their salaries are low and the "bonus" is really just deferred compensation. Right now, bonuses are at least supposed to be tied somewhat to performance. With legislation like this, aren't you basically telling these firms not to give "bonuses" but instead just pay all their workers a lot higher as part of guaranteed compensation? In other words, you don't really solve anything, and arguably make it worse. Maybe legislation like this should be tailored to those making more than x dollars per year, like many provisions in our tax code.

[bsdinobaby.livejournal.com]

Right now, bonuses are at least supposed to be tied somewhat to performance.

Isn't that the problem here? I think most people see the dismal performance of these banks, then see the bonuses, and think "If this is the bonus from a bad year... how much was there performance bonus in a good year?"

Also, I'd argue that by any standards their base salaries aren't "low". $40K is low. $120K isn't.

If your argument is that the bonus is deferred compensation that should not be performance based, and therefore SHOULD result in higher base salaries, I don't happen to disagree. If they are going to pay absurd bonuses regardless of performance, at least it is a much more honest assessment of what is going on at these companies.

[samtheeagle.livejournal.com]

Your market signaling concern -- that we'd be signaling to banks that they should simply raise compensation for all -- is not suitable to the emergency circumstance in which the federal government is throwing billions at the banks if not slowly nationalizing them. Whatever we think of that policy, it is ludicrous for banks that aren't lending... and that are being subsidized by taxpayers in ways that save their hides... then to take that money and give it to senior staff to the tune of billions. Even the market knows a one-shot deal when they see it: this isn't a general tax bill but a string -- a very reasonable string -- attached to a bailout.

[(Anonymous)]

Look, I'm not saying these people should get huge bonuses while taking public money. What I'm saying is that we need a bit more nuance here. It is all well and good to say yeah, these fat cats suck and off with their heads. It is another to recognize that there are business realities to running these firms and that bonuses (or let's call it "compensation that comes at the end of the year" instead), at least for the rank and file, is a necessary part of running an I-bank. I guess the other choice is to say hey, these banks lost so much money so who needs them, or let's put less talented people in charge who can lose the same money, but I would prefer that the talented people who were able to make this system work pretty well since the 1930s remain in charge and try to get this economy working again. I think paying them appropriately -- and we can debate what "appropriately" means -- is necessary for that to happen. I know, I know, it is all the rage to say the salt of the earth person who works with his hands to grow the corn or make the chair is far more virtuous than the fat cat banker behind the desk who doesn't roll up his/her sleeves like a real American should. But I am trying to take a more practical view of what it will take to get this economy running again, something that will benefit everyone, even the salt of the earth working man/woman.

[bsdinobaby.livejournal.com]

or let's put less talented people in charge who can lose the same money

So wait.

Are we talking about the rank and file, or are we talking about the leadership.

[bsdinobaby.livejournal.com]

I'm going out on a limb and citing the SCE filing from Bank of New York that details the offer letter to their CFO in 1997:

"Your starting annual base salary will be $350,000 and we will guarantee this base pay rate as a minimum through December 31, 1998. This means that during this period should your employment be terminated for a reason other than for Cause or you resign for Good Reason (as both terms are defined in the attachment to this letter) you would receive the remaining amount of base pay between your termination date and December 31, 1998 in a lump sum, less taxes. Additionally, you will receive a guaranteed cash bonus for 1997 of $525,000. This payment is subject to applicable withholding taxes and will be paid in January 1998, unless prior to January 1998 you resign for other than for Good Reason or have been terminated for Cause. For 1998 and beyond, you will be eligible for bonus payments under the Management
Incentive Compensation Plan."

So that's a base salary of $350K with a mandatory bonus of $525K.

$350K is a low salary?

[(Anonymous)]

Of course not. I'm not talking about the CFO or top executives. I am referring to the tens of thousands of other people in the rank and file.

[bsdinobaby.livejournal.com]

I think we're on the same page. The fact is that if the banking industry wants to have low base salaries and performance based compensation, the rank-and-file employees SHOULD demand clearer compensation and benefits. Especially so, as in many cases the problems of the bank are not caused by employee performance problems so much as strategic mistakes made by top executives.

Also it gives the bank less incentive to claim, at some point, that bonuses need to be cut because of bad performance, leaving people who have "low" base salaries with even less money even as executives still wind up with their "mandatory" bonus compensation.

I guess I'm not seeing how the shifts that you're proposing would result from Sam's proposed legislation are undesired.

[samtheeagle.livejournal.com]

Agreed there should be nuance. My point is that if I could write this bill in five minutes without nuance, Congress and its hordes of tax legislation experts shouldn't need weeks or months.

[samtheeagle.livejournal.com]

But while there should be some nuance, there shouldn't be much: nuance is a legislative tool to delay a bill to death. For instance, this kind of amendment to TARP should not be cover to reform the general compensation system for banks, the disparity between rank-and-file employees and CEOs, general tax policy, general fiscal policy, lending policy, etc. All of these matters are important and need to be addressed, but the first priority now -- and the only thing this bill should do -- is recoup the money that bank CEOs effectively heisted from the American people.

[heef.livejournal.com]

Word. Address the symptom, not the disease. Classic.

[samtheeagle.livejournal.com]

This bill isn't designed to cure the disease: it's intended merely to plug a single loophole that the prior Administration never should have permitted. Bailout money intended to promote minimal solvency and begin restoring the lending markets should not be siphoned to pay billions in bonuses, period.

[shaloha.livejournal.com]

right on.

[heef.livejournal.com]

Given the attention that the current administration is paying to funding *any* of what it's proposing to spend... good luck.