House passes stupid bill to tax back bonuses
I’ve been railing about excessive CEO and Wall Street compensation for years. Excessive pay was wrong even before the economy collapsed, and in fact it contributed to the bubble formation by rewarding people for big risks taken with other people’s money. And it is even more wrong now.
But this is really a stupid and unfair bill, driven by political pandering and fear. I hope Washington takes a breath, calms down and reconsiders. Because it is really a stupid bill.
“Congress moved yesterday to levy punitive taxes on bonuses paid by financial firms receiving government aid, threatening to undermine federal efforts to rescue the financial system by driving away participants in the programs.
A quickly assembled House bill was approved 328 to 93. It struck hard at Wall Street’s compensation system, which has come under fire because of the $165 million in bonuses distributed last week by American International Group to executives of the troubled unit that helped lead the insurance giant to the brink of collapse. Under the legislation, those who received bonuses of more than $125,000 would surrender 90 percent of their payments to a special income tax.
But the bill’s reach would extend to bonuses paid to tens of thousands of employees at the nation’s nine largest institutions that have received at least $5 billion in assistance under the $700 billion financial rescue package Congress approved last year. The measure also applies to Fannie Mae and Freddie Mac, the mortgage giants the federal government took over in September.
Because virtually all Wall Street employees receive bonuses — in many cases making up the majority of their compensation — firms would rather back out of the government’s rescue programs than be subject to such harsh tax measures, industry officials said. The banks could still survive, but without federal assistance they would not have enough capital to restart lending, which is considered central to reviving the economy.
Senate leaders aim to act next week on an even tougher bill that would affect all large banks that have received more than $100 million in asset relief payments. Collecting the tax is not necessarily the intent of the measure, lawmakers and aides said yesterday. Some AIG employees have returned their bonuses, and some Democratic leaders said they may forgo the tax effort and turn to other measures already in the works to limit executive compensation at recipient firms.”
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158 comments Add your comment
Eric
March 20th, 2009
7:12 am
Jay, I agree with you 100%.
Sam
March 20th, 2009
7:15 am
Somewhere deep under the surface of the Earth, Hell has frozen over…..I agree with Jay
Mrs. Godzilla
March 20th, 2009
7:16 am
Jay
I don’t agree 100%
Yes, the bill is probably unconstitutional, but it certainly is not the first bill that passed that didn’t make the cut.
The majority of America’s elected officials stood up yesterday and said, “we’re mad as hell and we’re not going to take it anymore”.
Will anything major come of it legislatively? Nope.
Did it make most of America feel good? Yep.
I say, Good for them!
jt
March 20th, 2009
7:16 am
The money was already stolen from us. Congress should not take the bonus money back. Tassle-loafed wall street crooks can do far less damage to America than our current congressmen. It’s not as if your typical taxpayer will see the money returned.
Mrs. Godzilla
March 20th, 2009
7:16 am
It certainly makes for interesting political theater.
Eddy
March 20th, 2009
7:17 am
Stupid people often pass really stupid legislation. All of this could have been avoided if the initial bill had stipulations in it that prevented the bonuses from being paid . Of course someone would actually have to read the bill first!!! Geithner and Dodd are the two seem to be responsible but are doing their “Who’s on First” routine.
Barry
March 20th, 2009
7:27 am
Abolish the payroll (a.k.a. FICA) tax. Let’s let Hendrik Hertzberg of that notoriously right-wing magazine, The New Yorker, explain it: “The payroll tax…skims around fifteen percent from the payroll of every business and the paycheck of every worker, from minimum wage burger flippers on up, with no deductions. No exemptions either – except that everything above a hundred grand or so a year is untouched, which means that as salaries climb into the stratosphere the tax, as a percentage, shrinks to a speck far below. This is one reason Warren Buffet’s secretary (as her boss has unproudly noted) pays Uncle Sam a higher share of her income than he does. In fact, three-quarters of American households pay more in payroll tax than in income tax”. Read all about it in the March 23 issue – the one with the hilarious depiction of the Rushmeister on the cover. Annoyance alert – I will post this suggestion every day until we get some traction.
Mrs. Godzilla
March 20th, 2009
7:29 am
Wanna talk stupid?
How about those KY election officials arrested and charged With ‘Changing Votes at E-Voting Machines’.
Not an Acorn to be seen!
The Voice
March 20th, 2009
7:33 am
The salary tax is on income just over $250,0000. Just how much does Obamalama zip e doo da make??????
AJC/DNC Management
March 20th, 2009
7:33 am
It is an improvement over wrapping piano wire around the necks of the AIG executive’s children, no doubt about that.
But yes, it is still ridiculous.
(IR/YW is censored again this morning?)
I Report/ You Whine
March 20th, 2009
7:37 am
So what is wrong with my post this morning?
Brad Steel
March 20th, 2009
7:38 am
Jay,
Just because it is driven by fear and pandering (what government isn’t to some degree), doesn’t make it stupid. Back up your assertion or else you’re no better than the sanctimonious bombast hurlers on AM and Fox.
I Report/ You Whine
March 20th, 2009
7:39 am
I know, the blog nanny saw that I was agreeing with Jay and must have thought it was a name jacking.
Off to the spam basket I went.
Sam
March 20th, 2009
7:40 am
Yeah, I sure am glad this bill makes Mrs. Godzilla “feel good”. What is it about liberals and “feelings”. Like psychiatrists: “how does it make you FEEL….?” This is what happens when feelings rule over their brains and common sense. Please Congress, stop wasting taxpayers time and money and figure out why y’all didn’t read the bill before the firestorm.
Like I said, all who voted for the bill and Obama who signed it should have their wages garnished to pay for the lawyer fees that will rack up b/c of this. Now that would be…..Accountability?
Mrs. Godzilla
March 20th, 2009
7:41 am
I’ll add one more piece to the discussion….
While the American International Group comes under fire from Congress over executive bonuses, it is quietly fighting the federal government for the return of $306 million in tax payments, some related to deals that were conducted through offshore tax havens.
read the rest here:
http://www.nytimes.com/2009/03/20/business/20aig.html?_r=1&hp
ConservativeAnchor
March 20th, 2009
7:43 am
OH MY. Twice in one week when Jay and I agree.
DB, Gwinnettian
March 20th, 2009
7:45 am
Jay, FWIW Nate Silver apparently agrees with you–he’s been railing against the tax for days now.
Me? eh. I think it’s likely wrongheaded, in principle, to attack what seems like an outrage-of-the-day with legislation that’ll likely wind up targeting unworthy people. But if half the Republican congresscritters thought it was S-M-R-T, who am I to judge?
DB, Gwinnettian
March 20th, 2009
7:46 am
Sam asked “What is it about liberals and “feelings”.”
I imagine it’s like conservatives and their feelings about abortion, gun control, and the death penalty, none of which are based on sound public policy but, rather, their feelings.
ByteMe
March 20th, 2009
7:48 am
Sam: I’ll take “feelings” over “faith in my religion’s fears” any day. At least feelings are internalized. So there.
As for the topic, yeah, it’s stupid, and yeah, it’s unlikely to withstand constitutional challenges, but sometimes the politicians have to do something to convey “the will of the people” even if it gets slapped down later.
The real question: If it gets that far, will Obama sign it, knowing that it’s likely unconstitutional and will just end up wasting money in defending legal challenges? Personally, if I’m Rahm, I’m doing what I can to make sure the Senate has a different bill and that the negotiations between the House and Senate to resolve the differences NEVER end. Let them vote on it, but never send a unified bill to the Pres. Everyone pretty much gets what they want that way.
DB, Gwinnettian
March 20th, 2009
7:49 am
“Back up your assertion or else you’re no better than the sanctimonious bombast hurlers on AM and Fox.”
That’s a little harsh–Jay doesn’t owe you a column-length piece three times a day, as a lot of the righties seem to believe–however, I am somewhat sympathetic with your sentiment here, in that
a) I doubt very much that Jay’s read the bill or even really understands the mechanisms by which it would actually implement this tax–I haven’t/don’t claim to, myself; and
b) maybe it’s just me, but Jay seems to be very eager to doll out the Troll Chow the last coupla days. I’m bracing myself for his “and conservos, I’m on your side with EFCA, too! that’d be BAD!” column which is likely to come in a few days.
(sure hope Jay proves me wrong on “b”)
DB, Gwinnettian
March 20th, 2009
7:51 am
if I’m Rahm, I’m doing what I can to make sure the Senate has a different bill and that the negotiations between the House and Senate to resolve the differences NEVER end. Let them vote on it, but never send a unified bill to the Pres. Everyone pretty much gets what they want that way.
Probably right about that.
Earl
March 20th, 2009
7:54 am
How dumb can a person be to think that Obama didn’t know that little line was in his stimulas package/bailout that if the executives had a contratual agreement for a multi-million dollar bonus, they’d receive it. Obama explained the need for the teleprompter 24/7 last night on The Tonight Show. What an idiot!
Mrs. Godzilla
March 20th, 2009
7:54 am
Sam
Good Morning! Yes, I have feelings and I use them along with reason and hard work every day. Don’t you?
Dedicated to you, Sam, with feeling:
http://www.youtube.com/watch?v=Jt8Q7Fsa_Vs
Ken
March 20th, 2009
8:00 am
You are strating to see the light Jay. More stupid tricks to come.
Yankee
March 20th, 2009
8:01 am
Maybe they should pass a bill that you have to read a bill before passing a bill. Call it the what would Bill do bill.
DB, Gwinnettian
March 20th, 2009
8:04 am
Call it the what would Bill do bill.
“what would Ah do? Ah’d feel yer pain. And maybe have some fries with that!”
.
(sorry, President Clinton.)
Taxpayer
March 20th, 2009
8:09 am
I see this as a needed step toward future legislation that properly deals with issues of economic fairness in our society. Bear in mind a key underlying topic that this bill brings to the forefront — taxation. This is about so much more than these bonuses. What was it, fourteen companies that have received bailout money owe back taxes. On a similar issue, companies right here in Georgia owe over $400 million in back taxes — the crooks. Then, there’s the issue of taxing certain types of “income” at the capital gains rate versus ordinary income rate — we’re not talking about 90%, we’re talking about 15% versus 28%. You know, the same rates that the rest of we the people have to pay. The 90% is a nice jab at where we used to be back before Reagan — it helps to maintain one’s perspective after all. And, there’s still those 52,000 tax evaders that UBS, another recipient of billions of our tax dollars via AIG, is shielding from the IRS. Indeed, this issue has only just begun to get interesting. So, let’s get down to business and talk about fairness.
Joe Matarotz
March 20th, 2009
8:09 am
If it’s written in the Post or the NYT, that’s good enough for Jay. He will repeat it. Someday, newsboy, you might actually learn to think for yourself.
That being said, it’s still a bad bill. There is, however, a bright side. It is sending a message, LOUD AND CLEAR, that bad behavior has negative consequences. It’s a lesson children learn early on in life. We all know by now that this entire financial disaster was the result of rewarding bad behavior. No amount of risk was too high because the reward was mindboggling. Even the Bob Nardellis of the world were aloud to come in, ruin a company, and be paid millions to leave. If any of us here (except Jay) did our worked like that, we’d be fired and living in a cardboard box.
When all the dust settles, the next administration can clean up these loose ends. For better or worse, this administration has the job of stopping the train and getting it going in the right direction.
G
March 20th, 2009
8:11 am
That’s a whole lot of Rushpublicants voting to raise taxes into the 90% bracket.
Kind of puts the lie to the phrase “tax and spend liberal,” doesn’t it?
Nice work cornering these hypocrites, Nancy.
Red Foreman
March 20th, 2009
8:11 am
I think the tax is just for bonuses above 250k for companies that recieve TARP funds…
PoliticalMan
March 20th, 2009
8:18 am
Mrs Godzilla, nice posts.
The bill is not stupid. It sends a message. But jeez, it is such a tiny, tiny drop in the bucket. The criminal behavior of Wall St, etc has been going on for yrs. Selling thin air should be a crime. Furthermore, they have taken us all down with them. I fully believe that the heads of institutions that sold financial products that they knew were bogus should be put in jail and all of their property confiscated.
If someone sold a lame horse in the West, maybe they were allowed to live. Have we lost our nerve?
Shawny
March 20th, 2009
8:20 am
You are correct, Bookman, it is a stupid bill. Kudos to the 6 democrats that opposed it. Doesn’t say much about the rest, though.
Californication
March 20th, 2009
8:20 am
If these idiots they WE elect feel the need to vote on some thing that they have NOT read then they should suffer the consequences. Why is it not mandatory that they read something that they vote on, not their aids or concubines, them. Why do we pay them hundreds of thousands of dollars and they can’t read a bill. Time to vote out ALL incumbents, vote libertarian! Lets make these idiots responsible for what they do!
Curious Observer
March 20th, 2009
8:23 am
This bonus tax bill is mere political posturing. Even a first-year law student can tell you that a retroactive law is unconstitutional. Meantime, the public gets hoodwinked into thinking that the tax bill is actually accomplishing something.
Dodd needs to go. After trying to lie his way out of the problem, he finally comes clean when he’s without any other recourse. It looks as though his constituency has already caught on. He’s down to dead-even with his Republican opponent in 2010, whereas he previously enjoyed a commanding lead in all the polls.
If Congress really wants to address the problem in the future, it will amend TARP to outlaw any bonuses in companies receiving those funds. The AIG executives will still be entitled to receive their bonuses this year, but they won’t next year.
AmVet
March 20th, 2009
8:27 am
Yankee, I love that idea!
What’s all this righteous neo-con fuss over legalities, schmegalities?
For eight solid years, complete contempt for the US Constitution enabled King George II and the puppet master, DickHead, to jolly well do whatever the hell they wanted. With nary a peep from the crowd that STILL thinks they were the best thing since sliced bread.
Just use a frickin’ signing statement, Uppity One…
G
March 20th, 2009
8:29 am
I really enjoyed President Obama on the Jay Leno show last night. Before anyone gets started on me about this, I do wish he hadn’t made the Special Olympics comment, but, hey, we are all guilty of foot in mouth syndrome, from time to time. As long as he doesn’t make a daily habit of it as Bush did, I’m cool.
He is such an intelligent, caring and charismatic person. I had grown accustomed to someone with all of that during President Clinton’s tenure,(and yes, I know he had the morals of an alley cat, but he was a great President) then we had the disastrous, dumb@ss Bush for 8 years, which seemed so much longer. Now we have the good things back again. I truly missed that during the Bush regime. I feel that’s why I am so enthralled with President Obama, he’s such a change from idiot Bush.
I Report/ You Whine
March 20th, 2009
8:35 am
In the past few days, Republicans have been heartened by some astonishing public opinion numbers. Pollster Scott Rasmussen found that more people, by a margin of 41 percent to 39 percent, would support a Republican than a Democrat in the next congressional race. A poll taken for National Public Radio showed similar results. Given that Democrats have trounced Republicans on that question for a long time, the new results are raising eyebrows on Capitol Hill.
You libs are doing a great job, even better than I expected, we need more ridiculous legislation like this^^, and I have no doubt that you won’t let us down.
I wonder how the David Brooks/ Frum, Kathleen “Oogedy Boogedy” Parker, Peggy Noonan and all the other aisle reachers are feeling about their idiotic, girlish emotional attachment to the Wonder Dunce about now?
Like I said before, you libs can keep these dimwits, they’re all yours.
I Report/ You Whine
March 20th, 2009
8:36 am
In the past few days, Republicans have been heartened by some astonishing public opinion numbers. Pollster Scott Rasmussen found that more people, by a margin of 41 percent to 39 percent, would support a Republican than a Democrat in the next congressional race. A poll taken for National Public Radio showed similar results. Given that Democrats have trounced Republicans on that question for a long time, the new results are raising eyebrows on Capitol Hill.-Washington Examiner
Keep up the good work, democrats!
The Voice
March 20th, 2009
8:36 am
Why don’t you folks just square off and beat the hell out of each other since you seem to hate each other so much…geeeeez
Brad Steel
March 20th, 2009
8:37 am
DB,
right-e-o. and well articulated.
Joey
March 20th, 2009
8:41 am
I almost agree with Mrs. Godzilla.
This is equivalent to petting and cooing to your dog right after you kicked it for lying on you bed.
Taxpayer
March 20th, 2009
8:41 am
Whack! BAM*!# Pow. BoOM! Stay tuned for the next smack down at the same bat time on the same bat blog. NA NA NA NA NA NA NA NA NA NA…
Civilian/Private/Corporal
March 20th, 2009
8:43 am
Jay:
1) I agree with you. Not only is it unconstitutional (and what that says about the House passing it knowing that) but it is political demagoguery at its very worse.
2) What about excessive pay for sports figures when the taxpayer is subsidizing those sports stadiums ?
3) Two more headlines from this morning on the bowling ball thing:
“Obama makes late-night gaffe”
“Obama makes ‘iffy’ statement”
You and I both know if it had been Bush the headline would be:
“Bush insults Special Olympics. Apology demanded”
The amazing hypocrisy of the “double standard” ………………..
Paul
March 20th, 2009
8:43 am
G
I recorded Pres Obama on Leno, watched it this morning. I thought it a very, very good appearance. Informative, relaxed – as I said yesterday, he got to take his case directly to the people without the commentator filters.
After I replayed it, I flipped to a news station with Geraldo and what were they discussing? The Special Olympics” comment. I thought “huh?” and they played the clip, with subtitles so you could understand what was pretty much obscured by audience laughter. I nearly changed channels at that point, but Geraldo made the point that it was one of those “unfortunate” comments that he was particularly sensitive to, given all his work with Special Olympics. He then said it was an overall fine performance.
So another case of ‘gotcha’ obscuring the important – and it is not just conservative media that does this.
Obama gave one of the most succinct explanations possible of the AIG crisis and he did it all without a teleprompter. Before the Bushbashers begin, he noted the attitude that made this possible has ‘been around for 15 or 20 years.” I think it more of a cultural phenomenon, regardless of the party affiliation of the person occupying the White House.
Anyway, given I don’t want to screw up the first hypertext link I’ve ever tried, just Google ‘transcript Obama on Leno’ and the first hit will be a NY Times link to the entire transcript. Just as people would like Congressmen to actually read the bill before voting, I think it entirely reasonable to ask bloggers to actually read the transcript before commenting.
Joey
March 20th, 2009
8:45 am
No. Its more like hugging and kissing your spouse the day after you knock out two teeth and blacken an eye.
@@
March 20th, 2009
8:45 am
So how does it make you feel, jay, knowing that you’re, at the very least, as smart as conservatives and, at the most, smarter than your liberal participants here.
Something I think that is being ignored is that this makes the pols, yet again, look incompetent which is what’s keeping the market in chaotic confusion.
Paul
March 20th, 2009
8:47 am
Oh, sorry… thread comment.
Agree today, agreed with the retroactive part when it was first discussed. As far as future impact – the effect on Wall Street where bonuses can form the majority of a compensation package, well, fiddlesticks, they can just restructure their compensation packages to more reflect what happens elsewhere (standard salary, marginal or no bonus predicated upon defined metrics) like most of the workforce gets. Heck, most people nowadays think just keeping your job is a pretty good ‘bonus.’
Civilian/Private/Corporal
March 20th, 2009
8:49 am
“House passes stupid bill to tax back bonuses”
Jay – Shouldn’t your title have been ….
“Stupid House passes bill to tax back bonuses”?
The bill is an inanimate object.
DB, Gwinnettian
March 20th, 2009
8:49 am
G & Paul, here’s a link to the actual transcript, because I wanted to see what the fuss was about.
And here’s the actual exchange:
Q Now, are they going to put a basketball — I imagine the bowling alley has been just burned and closed down.
THE PRESIDENT: No, no. I have been practicing all — (laughter.)
Q Really? Really?
THE PRESIDENT: I bowled a 129. (Laughter and applause.)
Q No, that’s very good. Yes. That’s very good, Mr. President.
THE PRESIDENT: It’s like — it was like Special Olympics, or something. (Laughter.)
Q No, that’s very good.
THE PRESIDENT: No, listen, I’m making progress on the bowling, yes.
I read that as a “Jay, your praise of my bowling prowess is in the same spirit of those given Special Olympians. Just being there and competing is a kind of victory.” Which isn’t especially mean-spirited, but pretty tone-deaf.
Were you or I to say something similar on the air, it’d probably not be noticed, but this is the President, and his gaffes are newsworthy. See also–”workin’ hard to put food on your family.”
DB, Gwinnettian
March 20th, 2009
8:50 am
arggh, that’s the second time in two days I forgot to close the dang barn-door- href tag thingie. Sorry.
Later, all.