John Hinderaker of Powerline is enormously upset about the prospect of a banana republic developing in the United States, because we are about to start confiscating the hard-earned wealth of bank tellers:
Wells Fargo didn’t want any TARP money, but the government forced it to take more than $5 billion worth, so Wells Fargo employees who receive bonuses would be subject to Pelosi’s proposed tax. Say you’re a teller at a Wells Fargo branch in Minnesota and you’re married to a lawyer who makes $250,000 this year. You get a $10,000 bonus for your good work during 2008. The government steals it all (90 percent federal plus 8.5 percent state plus, unless it’s included in the 90 percent, 3 percent Medicare). That is simply insane.
Indeed, it is insane. Given that bank tellers average salaries of $22,000/year in the United States, it’s hard to imagine that many of them are taking home bonuses that equal half of their salaries.
Is there any scenario under which conservatives in this country will concede that highly-compensated individuals at financial companies need to begin paying reasonable tax rate? Or that it’s incredibly irresponsible to award bonuses to the very people responsible for the economic crisis?
It appears not.
Article by Don Pogreba
Don is an English/Debate teacher and debate handbook author who lives in Helena, MT, and who can't imagine living anywhere other than this glorious state. Much of his writing happens late at night and he is unlikely to respond to your comments during the day.
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I think it’s important to get the facts before lighting the torches and grabbing the pitchforks. There are performance bonuses that have to met specific hurdles. Retention bonuses are a different animal altogether. Dave Budge has an excellent column today regarding AIG. http://davebudge.com/?p=1849 All that has happened occurred under the watchful eye of our policians and regulators. The focus should be back on them first in my opinion.
It’s interesting to me that conservatives are only concerned about “class warfare” and “redistribution of wealth” when those terms are used to describe transfers from the wealthy to the poor. They seems quite comfortable with the reverse.
Pogie, I think your context is wrong on this matter. The US wealth creation engine depends upon investment and respecting contractual requirements and rewards. As luck would have it Budge has another column on point. http://davebudge.com/?p=1850 To conjecture, as a general rule, that conservatives “seems quite comfortable with the” transfer from the poor to the wealthy lacks foundation and substance. See: http://www.realclearpolitics.com/articles/2008/03/conservatives_more_liberal_giv.html
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…Arthur C. Brooks, a professor at Syracuse University, published “Who Really Cares: The Surprising Truth About Compassionate Conservatism.” The surprise is that liberals are markedly less charitable than conservatives.
If many conservatives are liberals who have been mugged by reality, Brooks, a registered independent, is, as a reviewer of his book said, a social scientist who has been mugged by data. They include these findings:
– Although liberal families’ incomes average 6 percent higher than those of conservative families, conservative-headed households give, on average, 30 percent more to charity than the average liberal-headed household ($1,600 per year vs. $1,227).
– Conservatives also donate more time and give more blood.
– Residents of the states that voted for John Kerry in 2004 gave smaller percentages of their incomes to charity than did residents of states that voted for George Bush.
– Bush carried 24 of the 25 states where charitable giving was above average.
– In the 10 reddest states, in which Bush got more than 60 percent majorities, the average percentage of personal income donated to charity was 3.5. Residents of the bluest states, which gave Bush less than 40 percent, donated just 1.9 percent.
– People who reject the idea that “government has a responsibility to reduce income inequality” give an average of four times more than people who accept that proposition.
Brooks demonstrates a correlation between charitable behavior and “the values that lie beneath” liberal and conservative labels. Two influences on charitable behavior are religion and attitudes about the proper role of government.
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While I certainly feel that you are correct that people must begin to realize that taxes based on income brackets tends to be far more utilitarian and thus for the greater welfare of the country as a whole, we cannot justify all actions with this belief. That is, while I agree that the executives at AIG and other large companies should not be dealing out bonuses to the very people who sank our economy, taxing them at a rate of 90% in order to punish them is just immoral and unethical. That is not to say that retribution is not always deserved, but to deal it out in a fashion that is so blatantly fueled by vengeance and an attempt to cover up the government’s own oversights is outrageous just as AIG’s contracts are outrageous. We shouldn’t punish unethical behavior by acting in an unethical manor.
From my perspective, the problem is that these companies just don’t seem to get it. Whether it’s traveling to resorts or issuing huge bonuses, they just don’t seem to understand that they have failed to act responsibly and that others are paying the tab for their profligacy. Should Congress ignore their behavior and trust that they will suddenly start behaving responsibly with tax money on their own?
Craig, as to your point about the economic system depending on “respecting contractual requirements,” what would have happened to AIG if it had collapsed? Contracts notwithstanding, those bonuses certainly wouldn’t have been paid. Given that the government saved AIG from collapse, doesn’t that give it the right to some oversight?
“That is, while I agree that the executives at AIG and other large companies should not be dealing out bonuses to the very people who sank our economy…”
Until the specifics of those bonuses are understood it’s hard to make an informed opinion. If the AIG people who were retained had both a retention carrot to stay on and incentive hurdles to reduce a book of troubled business, and they stayed and met those performance hurdles; then pay them as per their contracts. Citizen wrath and outrage should be aimed at our politicians and regulators.
Pogie, true. Our government seems to believe that AIG staying alive and unwinding bad business in a controlled way is much better than caos and the knock-on effects.
Your post leads me to ask two things:
1) Is it your view that a 90% tax rate on any amount of income is “reasonable?”
2) What evidence to you have that those who are getting the cash are the same ones that helped cause this mess?
This might be hard to imagine, but my original post was about how some conservative commentators are willing to create insane, illogical hypotheticals to critique any management of these corporations. Bank tellers receiving $10,000 bonuses, for example.
I don’t think anyone really anticipates a 90% tax on bonuses. But I don’t think anyone really believed that companies like AIG would continue to act this irresponsibly, either.
“But I don’t think anyone really believed that companies like AIG would continue to act this irresponsibly, either.”
Starting in 2008, I don’t think they did.
By the way, out of the AIG TARP money about $13B went out the back door to Goldman Sachs. For the 2008 election cycle, AIG gave big to Obama and Dodd. Funny, Goldman Sachs did the same thing. http://www.opensecrets.org/orgs/toprecips.php?id=D000000085
I believe Goldman S actually started the run on AIG with investment calls. Now, are our politicians incredibly stupid and blind, or are they intentionally deceiving us by pointing to AIG to pillage inorder to cover there own tracks in this mess?
Where is the fury over Dem friendly Goldman Sachs $16B in bonuses? http://abcnews.go.com/Business/FunMoney/story?id=2723990
FYI I attempted to comment again earlier, but after I hit submit I got an error page and your site wouldn’t reload.
What I think I said:
Condescension aside, I am aware of the main point of your post, and I do agree with some of it. My first question was an attempt to clarify what you had stated in your last paragraph. I assume you believe a 90% tax is reasonable in this scenario, is that right? My second question remains unchanged.
I had two comments sitting in moderation. They have since disappeared.
Nope. I just got to them.
Pogie you got them at 1:18 pm, but did you understand them?
If I didn’t, would that say more about you or me?
Actually, I am wrestling with Hamlet at the moment, but plan to write back some thoughts later today.
“Frailty, thy name is woman.”
Then there are the words President Obama should speak without the TOTUS:
“What such fellows as I do, crawling between earth and heaven? We are arrant knaves all, believe none of us.”
I am working on eliminating the duplicate comments now, though I enjoy the illusion of this many responses.
I think the Goldman Sachs article (from 2006) you posted illustrates exactly what I do think. There should be a much higher rate of taxation on top earners in this country. The mind-blowing rate of compensation for executives at these companies is part of the structural insecurity of the American economy. It's not sustainable.
I've always advocated a maximum wage, because it would encourage higher incomes for those at the bottom and middle, while ensuring the executives could maintain a luxurious lifestyle.
The transfer of wealth in the past 20-30 years, created in no small part by reductions in the top marginal tax rate, has done real harm to our economy–and I hope someone has the courage to tackle the issue.
My concern about bonuses is not partisan. I just find it interesting to see how many conservative pundits are leaping to the defense of the poor victims left behind in these companies.
There's an interesting article on income equality in today's Financial Times:
http://www.ft.com/cms/s/0/3a901490-15b9-11de-b9a9…
Pogie, going back to the last question in your opinion piece you ask, "Or that it’s incredibly irresponsible to award bonuses to the very people responsible for the economic crisis?"
The WP article that I linked above claims that those remaining are not those people. But digging into the responsiblitiy angle, there is the further question about those people respnsible for arresting the crisis — Team Obama and congress. Capital Hill Blue writes a very damning article: http://www.capitolhillblue.com/node/16611
Doesn't it seem like the Krugman article you reference actually makes my point–that the underlying economic system is what needs to be fixed?
Don't mistake my criticism of the right's irrationality for an endorsement of what Obama has chosen to do. In my mind, it's too timid, too deferential to the "wizards of finance" who got into this mess, and too little focused on the needs of working Americans who are really going to suffer because of this mess.
That being said, isn't it time for the right to come up with a better answer than to criticize the President? Where is the plan from the "party of ideas"?
I think those ideas include tax reform that rewards capital formation and saving while keeping an eye to revenue growth. It includes regulatory reform to eliminate that which are of little value and very costly in compliance performance and reporting. It includes infrastructure investing. At least that is what I have read.
"And as far as Goldman Sachs is concerned, obviously they give money to liberal candidates; like everyone, they saw the writing on the Bush wall and wanted to get in bed with the right people. But a wide-ranging reform will include them too, especially as no true liberal has particularly fond feelings for Goldman Sachs, either. "
That's precisely why no real reform is on the horizon. Just look at Barney Frank, Maxine Waters, and Dodd. http://www.news-leader.com/article/20090323/OPINI…
If corporate heads really need to make so much money, why do top execeutives in America make much more, in relation to their lowest-paid workers, than in those corporations we compete with based in Germany? No one will doubt Germany’s competitiveness in international markets. I agree that a massive tax on bonuses is not the best solution; the best solution are is a more widespread effort to bring down execeutive pay, because frankly having that much money in the hands of individuals means the average American worker has less. Wealth in this scenario doesn´t trickle down, it trickles across. No matter how much money a CEO makes and spends, an unacceptably large proportion of it will end up in the hands of other CEOs. And as far as Goldman Sachs is concerned, obviously they give money to liberal candidates; like everyone, they saw the writing on the Bush wall and wanted to get in bed with the right people. But a wide-ranging reform will include them too, especially as no true liberal has particularly fond feelings for Goldman Sachs, either.
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