Taxing Wall Street Bonuses
From the Boston Globe:
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IN A BLATANTLY political move this month, the Labor government of British Prime Minister Gordon Brown imposed a one-time, 50 percent tax on bankers’ bonuses. Yet even though it may spring from Brown’s fear of losing an election next year, the tax is justified on economic grounds and as a matter of social justice. And after France followed suit with its own 50 percent tax on banker bonuses, arguments against a similar tax in the United States lost a key rationale.
The profits of US banks during the past year are exceptional because they owe so much to taxpayer bailouts and the government’s interest rate policy. . . So a tax on bonuses at US banks would simply give back to taxpayers some of the money they have donated to the banks. . . [AO: Taxpayers are rightly concerned by high bonuses paid to bankers. However, levying a 50 percent tax on bankers’ bonuses is unworkable and may be largely ineffective. For one, though London and Paris have instituted 50 percent taxes on bankers’ bonus, there really still are other places bankers can move to. The article suggests Zurich, Hong Kong and Singapore. These are viable options. There are others too. Moreover, a 50 percent tax on bankers’ bonuses is not advisable because the goal the editorial articulates, giving taxpayers back some of the money they have donated to banks, can be achieved in a better way—by retrieving the funds from the bank. A one time 50 percent tax leave room for companies to evade the tax by postponing bonuses or making other arrangements that delay payments or convert those payments to other types of compensation. Such a tax, if not evaded, would also disproportionately affect those who, presumably, contributed most to the economy. A better approach may be a one-time tax on banks themselves. Banks would be unable to avoid paying the tax. Moreover, the tax would not disproportionately affect individual employees. Instead, since the American taxpayer lent money directly to the banks, the taxpayer would be getting a refund, directly from the bank, of her donated money.] |
In the past, US banking executives warned that any such taxes would make them less competitive than London or Paris in attracting and keeping “talent.’’ Read the full opinion HERE.
