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Thursday, March 19, 2009

The 90% tax 


The Democrats in the House rammed through a 90% tax on bonuses paid to employees of companies that have accepted government bailout money, even if the Secretary of the Treasury insisted on the "investment" in the first place and put restrictions on its repayment. In so doing, the House Democrats have guaranteed that nobody in their right mind would invest private capital in a bank or other financial institution that has taken government money. After all, how will any investor know that the Congress will not just change the terms after the fact? More directly, we trust that the Congress knows more people who, like Ed Liddy, are willing to be humiliated on national television in return for $1 per year. Because actual competent financial executives who want to make a little coin are not going to take jobs with these firms.

I'm not so sure that the Members -- and I use the term advisedly -- who voted for this confiscation have thought ahead to the inevitable attack ads in the next election cycle: "Congressman Dork voted to raise tax rates to 90% for some people making more than $250,000 per year. What will you do when he comes for your money?" Neither am I sure that this bill will turn out to be a vote-getter even among the 41% of the U.S. population who are outside the federal income tax system.


24 Comments:

By Anonymous sirius_sir, at Thu Mar 19, 06:25:00 PM:

Ed Liddy is either a saint or a fool. But if I were him I'd have left in mid-interrogation and said something along the lines of, "Take this job and shove it."

He still has that opportunity, though, as do all the employees who are being stigmatized and penalized for some rather transparent political cover.

But no doubt Congress could do just as good a job of running these businesses as they are doing running the country.

Running it into the ground, that is.  

By Blogger Escort81, at Thu Mar 19, 06:48:00 PM:

Take this job and shove it, Jonny Paycheck's greatest hit!

If my old classmate Eliot Spitzer is trying to put in his two cents about AIG, it really is becoming theater of the absurd.

Then again, I suppose that having unprotected anal sex with a hooker (um, as the "pitcher") might make you an expert on financial sodomy.

That said, one wonders whether AIG would have run into the problems it did in its FP segment with the CDS product if Hank Greenberg had still been in charge (recalling that Spitzer effectively forced out Greenberg). AIG was very much the company that Greenberg built, and perhaps he might have been better at not making "bet the ranch" commitments.  

By Blogger Viking Kaj, at Thu Mar 19, 06:58:00 PM:

See my previous posts.

Obama accepted $ 120,000 in 2008 campaign financing from AIG and ran a surplus of $ 30 million.

If you think Obama should give those funds to the US Treasury (as I do) please email him at the following address:

www.whitehouse.gov/contact/  

By Anonymous Gandalf, at Thu Mar 19, 07:00:00 PM:

If I were Liddy I would have put a dollar on the table and suggested that they needed it more than I did.

This is the stupidest thing that Congress has done yet and there are a lot contenders for that honor.  

By Blogger K. Pablo, at Thu Mar 19, 07:32:00 PM:

Bill of Attainder. Sometimes it's useful to crack open that ol' chestnut: The U.S. Constitution.  

By Anonymous MarkJ, at Thu Mar 19, 07:36:00 PM:

As the story goes, Heinrich Himmler, the head of the SS, and Martin Bormann, Hitler's personal secretary, roundly detested, and engaged in intrigues, against each other. However, Bormann eventually got the better of Himmler by discovering his opponent's achilles' heel; namely, Himmler's insatiable thirst for more titles and power. When Himmler--who was no military genius--demanded important military posts, Bormann only too obligingly arranged to give him what "Heinie" wanted. Eventually, Himmler cracked under the pressure of his monumental responsbilities, suffered a nervous breakdown, and rapidly fell out of favor with Adolf Hitler.

Here's my point: if Congress thinks it can run companies, in particular, and the economy, in general, better than anyone else...then let's go ahead and give it every opportunity to do so. In six months' time, 1/3 of our congressmen will be begging for mercy, 1/3 will be offering their resignations, and the other 1/3 will have suffered nervous breakdowns. And they will never bother us again.

Is this a cunning plan or what?  

By Anonymous John, at Thu Mar 19, 08:03:00 PM:

Gandalf ... actually, it should the ~25 cents earned YTD, less taxes.

The public deserves to be be outraged, insofar as most bonuses are based at least in part on company performance. AIG lost 62 billion in 4Q. When you hand out on average over 2M in bonuses per 'leader', the masses look at it and think, gee, these guys virtually bankrupted or soiled the global economy and our policians reward that with a bonus equal to a working man's lifetime earned income. They've put more capital in, the people's money, than the market cap at the 52-week peak.

What's up with that?

If the GOP is inable to capitalize on that come next Fall, I'll never give them another dime.

I'm all for paying a competitive wage and combat pay to execs who are in the line of fire, but this theatre is just silly at this point. And while they're at it, the leadership in DC should work for free, having done absolutely nothing in terms of oversight to forestall this disaster.  

By Anonymous Anonymous, at Thu Mar 19, 08:09:00 PM:

If a retroactive tax increase isn't an ex post facto law, this isn't a bill of attainder.

Don't forget that after the non-deductible employee's half of FICA, they're keeping less than 10% of their bonus.  

By Blogger lewagner, at Thu Mar 19, 08:10:00 PM:

These are all interesting comments but they by-pass the main issue. The main issue is that these charlatans in DC are merely milking the situation for more face time.

It cause me great despair to see the ilk of the people in Congress and the WH.  

By Anonymous Gandalf, at Thu Mar 19, 08:11:00 PM:

Remember - Humpty Dumpty sat on a wall, ... All the kings horses and all the kings men couldn't put Humpty Dumpty together again.

Don't even think about letting Congress try to run companies. In six months time we could never get things together again.

19 months and counting.  

By Anonymous Gandalf, at Thu Mar 19, 08:19:00 PM:

Check out "Minority View" on Powerlineblog.com before reaching the conclusion the bonuses were an outrage. The real outrage is the political incompetence and grandstanding. We truly need a massive housecleaning and not by the current squeaker.  

By Anonymous meta-4, at Thu Mar 19, 08:19:00 PM:

Today's quiz: What do former Senator Joe McCarthy, R. WI., and current representative Barney Frank, D. MASS. have in common?

Answer: Both were/are tail gunners........  

By Blogger Escort81, at Thu Mar 19, 08:45:00 PM:

meta-4 - I think the tailgunner joke only works if it is the case that Rep. Frank is, er, a pitcher and not a catcher, and I actually don't want to know the details of that.

But the expected answer to your riddle that both wanted names named is kind of scary.  

By Anonymous Anonymous, at Thu Mar 19, 09:05:00 PM:

MarkJ: "if Congress thinks it can run companies, in particular, and the economy, in general, better than anyone else...then let's go ahead and give it every opportunity to do so. In six months' time, 1/3 of our congressmen will be begging for mercy, 1/3 will be offering their resignations, and the other 1/3 will have suffered nervous breakdowns. And they will never bother us again. Is this a cunning plan or what?"

Ah, the "AE-35 Unit" strategy. (From 2001: A Space Odyssey - HAL9000 suggests "I would recommend that we put the unit back in operation, and let it fail ... we can certainly afford to be out of communication for the short time it will take to replace it.")

It appeals to me superficially, however...

First, it assumes that the short-term pain will be outweighed by the long-term benefit. Indeed it assumes that America can withstand the shock of their failing and emerge in some recognizable form on the other side. But America is not a closed system, it's one player among many, and our rivals and enemies are already feeling their oats. How many nations would love to see us stumble, and pounce on whatever opportunity that handed them?

Second, it assumes that we have congresscritters who possess the slightest sense of personal honor and responsibility, or even a basic concept of cause-and-effect and objective reality. Remember, we're talking about people like Jonathan Edwards and Rod Blagojevich and Chris Dodd. In one day Dodd went from "I have no idea who inserted that provision" to "I inserted that provision." I can easily imagine a scenario in which they're not resigning or begging for mercy, but instead proudly saying "look what a good job I'm doing." And Obama, being Too Big To Fail, would never be permitted to receive the slightest taint.

Remember, Love means never having to say "I'm sorry." So does narcissistic personality disorder.

-Propsect  

By Anonymous Anonymous, at Thu Mar 19, 09:06:00 PM:

er, Prospect.  

By Blogger Diogenes, at Thu Mar 19, 10:07:00 PM:

Question: Will Congress tax AIG for value received from Mr. Liddy? His services are clearly worth more than one dollar.  

By Anonymous feeblemind, at Thu Mar 19, 10:15:00 PM:

My fear is that targeting certain people/industries with 90% taxes could happen regularly if this precedent is set. Why stop with AIG? Why not tax everyone who is registered as a Republican at 90%? Or coal fired utilities? There is no end to the mischief and damage that could be caused in abusing tax policy like this.  

By Anonymous Anonymous, at Fri Mar 20, 12:12:00 AM:

You damn fools! Don't you see that if they can exact a 90% tax rate on them, they can exact a 90% tax rate on US!  

By Blogger Who Struck John, at Fri Mar 20, 01:04:00 AM:

This Congress and this President have just shown themselves to be the modern-day equivalent of the Gracchi brothers. It has been demonstrated that if you are unpopular, anything you have can and will be taken from you. No Constitutional limitations will protect you.

This bodes poorly for the future of the republic.  

By Blogger Please don't drop my Chicken., at Fri Mar 20, 01:40:00 AM:

ABOUT TIME.

I'm sick of watching derivatives traders and their ilk just 'buy and sell' and make money for NOTHING!

(Although it would be just darling if I could get a pay rise and watch my house appreciate)

And executives being paid millions!

(Aren't I glad I didn't go to college, er, think about it later)

And a CEO trying to honour a contract!

(Don't dare touch mine)

Fire them all!

And - er - employ - er - ME!

'Cause, like, it's totally easy. And if I can't do it, I can hire others to help...

Surely bankers will come and get paid a ton for easy work?

(Wait, the pay isn't too good at the moment)

Well at least they'll be respected by the public for helping out in a crisis caused by politicians...

(Wait, society hates these people)

So we'll just have to get others like me to run it. Easy.


We'll Show 'Em.

- Jack (& Jill) Taxpayer.  

By Blogger Gary Rosen, at Fri Mar 20, 04:29:00 AM:

"I'm not so sure that the Members -- and I use the term advisedly -- who voted for this confiscation ..."

Calling them "members" is actually quite appropriate, if you follow my drift.  

By Anonymous Anonymous, at Fri Mar 20, 10:11:00 AM:

"I am altering the deal. Pray I don't alter it any further."

D. Vader  

By Anonymous Anonymous, at Fri Mar 20, 02:03:00 PM:

What I find fascinating is the 85 Republicans who voted 'yea' to the bill including young Eric "read my lips part deux" Cantor (R-Va). So much for the party of tax cuts!  

By Blogger Dawnfire82, at Sun Mar 22, 10:38:00 PM:

Really?

In the whole stupid drama, THAT'S what you find fascinating?

Might want to revisit some priorities...  

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