Friday, March 20, 2009

90% tax on big bonuses in the US

Now how's that for a windfall profit tax?

For years humongous bonuses were defended with the fable that "the best have to be rewarded" and "otherwise our best executives will fly elsewhere".

The recent AIG scam, where the ailing insurance giants awarded themselves bonuses of $165m the moment they pocketed $170bn in aid from the government, confirms that a load of bollocks was being fed to the public.

Those big corporations really are the biggest scroungers on earth. You wave some money in front of them and they act like a paedophile in a playground. Luckily though it looks like the tide has turned, at least in the US. Following the AIG scam, yesterday the House of Representatives voted to introduce a 90% tax on big bonuses from firms bailed out by taxpayers.

President Obama had previously dubbed AIG's bonuses "an outrage", adding that they are a symptom of "a bubble and bust economy that valued reckless speculation over responsibility and hard work". "It's hard to understand how derivative traders at AIG warranted any bonuses, much less $165m in extra pay," he said, noting that "all across the country, there are people who work hard and meet their responsibilities every day, without the benefit of government bailouts or multimillion-dollar bonuses" (incidentally: I never thought I'd live to hear a US President ever saying that!).

However, like in the UK, why the Government didn't set strict conditions when they pumped gazillions into big corporations as part of the bailouts remains a mystery. Well, not quite.


Madam Miaow said...

90% — about time too. The reason Britain was a pleasure to live in compared with most other parts of the world was that a similarly high top rate of tax after World War II funded the NHS, education, transport, etc.

It's a scandal that Labour has identified so much with the rich and powerful that they kept John Major's 40% top tax rate. Even under Thatcher it was 60%. This places her to the left of 12 years of Labour.

Anonymous said...

Two comments.
1) 165 million out of 170 billion is about only 1 thousandth (you get about 170 billion divided by 1000 makes 170 million), so the bonuses didn't really caused the situation for the bailout.
2) As you can read here, if it can be trusted, the president knew about the whole thing for months.

Take care,

claude said...

gta mls,

it really is quite straightforward:
the bonuses may not have caused the situation for the bailout. What caused it though, was the ridiculously reckless conduct of those who now expect to pocket bonuses.

Which is why them pocketing $165 million in retention bonuses is in bad taste, to put it mildly.

I presume you're a taxpayer. For you to find arguments defending those scrounging scumbags smells of Dickensian levels of submission.

soundtrack: Joy Division, Leaders of Men

Stan Moss said...

Also who on earth decided that the whole derivative traders/bankers/insurers field is by default defined by bonuses?

Why them?
Why not doctors?
Why not teachers?
Why not bus drivers?

Can you imagine that?
Every time they drive a bus on time they get double their yearly paypacket. Of course that could only be sustainable with fake money. That's how those fraudsters lived in the run-up to the crisis. For them, it was a given.

Anonymous said...

Claude: I agree with you, of course. It's ridiculous that anyone should get paid for messing things up. All I was pointing out was that the differences between the two amounts, because most people can't really see the difference between million and a billion - not that it's your case.
Take care,