House to Vote on AIG Tax Today

I really never thought I'd live to see the day when taxation in America made the shift from an apparatus resembling a random molotov cocktail that ruins every taxpayer's life to one of a precision guided missile launched with the intent of taking out a select few. I suppose it was only a matter of time.

The House has scheduled a vote on a bill today taxing bonuses at a 90% rate for employees of companies that have received $5 billion or more in federal aid:

http://news.yahoo.com/s/ap/20090319/ap_on_go_co/a…

I particularly enjoyed the comments made by the smug and despicable Charlie Rangel (pictured, appropriately enough, being led away in handcuffs):


"We figured that the local and state governments would take care of the other 10 percent," said Rep. Charles Rangel of New York, chairman of the tax-writing House Ways and Means Committee.

I'm having a hard time keeping down the bile that keeps rising in my throat when I think about this.

 

Agreed. This makes me physically ill. I'll leave you with a short excerpt from an article I read on the subject by Charles Krauthammer:

When you get politicians ahead of the mob running companies, you get madness and idiocy here. The contracts are legal contracts, and it wasn’t as if these bonuses were unknown or sprung at the last minute. They were written into these agreements over a year ago, long before AIG was even nationalized or partially nationalized.

And the problem here is that by the Congress now trying to break the contracts by a ruse, essentially a 100 percent taxation or confiscation, they’re going against a few hundred years of common law where you don’t do retroactive confiscation or bills of attainder, which are laws aimed at particular individuals. It’s just not done.

And to sacrifice all of those principles of democracy and business and contract over … a tenth of one percent of the bailout, is absurd, particularly in a Congress which just a week ago signed a bill with enough pork to fund these bailouts for about 20 years.

  • Capt K
- Capt K - "Prestige is like a powerful magnet that warps even your beliefs about what you enjoy. If you want to make ambitious people waste their time on errands, bait the hook with prestige." - Paul Graham
 

in all fairness, this only applies to families making more than 250k. i'm sure they'll be okay without that extra bonus check.

still, from a principle point of view, this sucks. politicians are losers.

 
ballersdontlie:
in all fairness, this only applies to families making more than 250k. i'm sure they'll be okay without that extra bonus check.

still, from a principle point of view, this sucks. politicians are losers.

That is retarded. Just because you made 250K, you don't deserve any more? There are plenty of people out there that are making over 250K and cannot get by on too much less than they're currently making. Take someone making 400K... big mortgage payment, putting kids through college, etc...

There's no way this will pass. Its absolutely ridiculous. Wouldn't this mean everyone making over 250K (everyone above associate) at every BB bank will have to forfeit their bonus to the US government? All of them received $5B+.

 
you-down-with-SEC:
ballersdontlie:
in all fairness, this only applies to families making more than 250k. i'm sure they'll be okay without that extra bonus check.

still, from a principle point of view, this sucks. politicians are losers.

how did you get here?

This is seriously one of the most retarded posts I've seen.

being a dick is not a req for posting on this forum.

the tax only applies to families making 250k+ in companies that are receiving $5 billion from the government.

on a good day, these are companies that are having serious liquidity issues and are on the brink of insolvency. on a bad day, these are companies that should not exist right now. either way, most of these people would not have a job right now, much less have a 250k+ salary, much less be getting a bonus check.

if they don't like their salary, they should go find another job that isn't being subsidized by the government. oh wait, there aren't any other jobs. fuck.

 
ballersdontlie:
in all fairness, this only applies to families making more than 250k. i'm sure they'll be okay without that extra bonus check.

still, from a principle point of view, this sucks. politicians are losers.

you god damn red neck how did you end up here?

 
ib_analysts:
ballersdontlie:
in all fairness, this only applies to families making more than 250k. i'm sure they'll be okay without that extra bonus check.

still, from a principle point of view, this sucks. politicians are losers.

you god damn red neck how did you end up here?

I was thinking the same thing. for f-in' 250k I should have just gone on to med school like everyone else in my family- pick the right specialty and guaranteed 400k.

 

250K plus or not, this shocks me. If you are still on top of your game you shouldn't be getting screwed by this. If you lost $100M last year, that might be a different story. Then again, you probably would have lost your job by now.

 

This is like a boxing match where we keep getting knocked out every round, yet the fight continues. This is ridiculous. So the tax is levied on over $250k salaries and not only AIG, but all companies' who received more than $5 Billion in funds. So if I understand this correctly, this effects not just AIG on BONUSES ALREADY RECEIVED. Retroactive taxes, this is absurd. Oh and Rangel seems like a stand-up guy, I mean besides admitting failing to report income from a rental property he owns in the Dominican Republic, improperly leasing a rent-controlled apartment to use as an office, and that he misused House stationery to solicit money for a New York academic center bearing his name.

EDIT: So this means no one at JPM, Citi, MS, etc will make more than 250K this year unless the money is paid back to the gov't.

 
Chim Chim:
So this means no one at JPM, Citi, MS, etc will make more than 250K this year unless the money is paid back to the gov't.

You forgot GS. But even pay at foreign investment banks would be indirectly effected- Do you really think Deutsche Bank, Credit Suisse, etc. would pay their workers much higher than the going rate at US banks?

In the second stage, lower pay standards would also extend to HFs/PEs/other funds for everone except top management.

Pay for executives in high finance would then be similar to pay for executives in any U.S. Industry- top management makes money, everyone else makes peons (or comfortable, but not alot).

 

This isn't even socialism, this is communism!

Good luck keeping a bank like BofA afloat, when Ken Lewis said it will take 2-3 years (which we can assume will be a bare minimum) to repay the TARP funds. No one talented is going to stay here if they can't make more than $250K over the next 3 years or so. Unless BofA, Citi etc. start raising salaries substantially, I expect a massive drainage of top level employees at these banks.

And who is to say that JPM, GS, MS and others will be able to repay their TARP money anytime soon. I have read an article about Wells Fargo which said that it didn't want to take TARP funds but the government forced it down their necks, which in effect limited Wells' ability to raise funds from private investors in the capital markets. And because of that limited access they will not be able to repay the TARP funds any time soon.

This has to be unconstitutional. There is no way that our Founding Fathers, would have allowed for this. Any lawyers on this board?

 

I rarely comment on politics but this is the must retarded shit I have ever heard of. I'm sick of the average Joe complaining about "executive pay and bonuses." This country sucks. I spent 8 years serving this shithole with my ass on the line and I'm wondering why I wasted my time. Now i'm going to leave work and smash somebody's face in, probably the hippies outside my building protesting saying the auditors caused the financial crisis. On a side note, I thought this was entertaining. Our fearless leader.

 
stk123:
The senate still has to vote right???

Yes, thank god. Hopefully they don't succumb to the mob rule that is the House

Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard. -30 Rock
 
Edmundo Braverman:
AIG execs should stage an immediate walk-out and nuke the fucking Dow back to 3,000.

I wouldn't blame them if they did. I bought double long oil and commodity etns on monday, and thanks to the Fed being reckless, I'm already in the money. I didn't know Murphy's Law would be applicable to our government and economy, but they proved me wrong.

 

The senate may not pass this one but it looks as though it is currently working on a different version of the bill. The senate's version:

"The Senate bill is much broader than the House version -- taxing bonuses at any company that received federal assistance, not just the largest ones. It would tax bonuses at 70%, split evenly between the company paying the bonus and the employee receiving it."

Also, I am aware that bonuses are taxed at 45%. So this 35% (employee's share) is a surcharge on the 45% or will they just be required to be pay only 35% on any amount greater than 250K?

 
Best Response
indian-banker:
The senate may not pass this one but it looks as though it is currently working on a different version of the bill. The senate's version:

"The Senate bill is much broader than the House version -- taxing bonuses at any company that received federal assistance, not just the largest ones. It would tax bonuses at 70%, split evenly between the company paying the bonus and the employee receiving it."

Also, I am aware that bonuses are taxed at 45%. So this 35% (employee's share) is a surcharge on the 45% or will they just be required to be pay only 35% on any amount greater than 250K?

Your post is very confusing, and not very accurate.

Bonuses are not taxed at 45%. Income is income and is taxed at the same marginal tax rate, whether it be bonus or gambling winnings, unless it is capital gains or dividends, etc...

I believe that the senate is trying to pass something like a 35% excise tax for the employee, which means you will pay your normal taxes plus 35% on whatever bonus you got, and the employer will have to match that 35% as well on the bonus number. Although it is hard to understand exactly what the senate is doing because those idiot writers at yahoo usually do not understand what they are writing about.

 

Well, this country was fun while it lasted.

I'm looking forward to the retroactive tax increases on defense contractors, oil companies, pharmaceuticals, and whoever else raises the ire of congress.

 

I am trying not to give up hope for America yet, but the one thing that could impress me would be a veto of the bill by Obama. Even better would be the IRS refusing to collect, like the California comptroller who told Arnold to go fuck himself when he ordered him to stop paying employees. But this financial crisis isn't going to be remembered for ending America, this populist ignorance and mob rule at the highest levels of our government is. It's just very scary - if I were negotiating a contract now I'd negotiate a nuclear proviso to guard against this 100% taxation.

 
These guys can, and should, destroy the economy to show these petulant children in Washington who really runs the country.

Then you'd see how fast Congress would back off.

lol nice idea but wouldn't fly even if they could. it would just bring on even more regulation than they are already planning. And if there is one thing that KILLS pay in financial services its government regulation.

Good study on history of financial industry pay to help see where we might be going:

http://pages.stern.nyu.edu/~tphilipp/papers/pr_rev15.pdf

 
endlessrain:
never thought I would ever feel ashamed to be an American..

All the times liberals talked about fleeing to Canada, I couldn't figure out why they were so upset. Now I know. I have nothing in common with the people setting the agenda for the country, or the supposed populace they are appealing to (isn't inciting a mob illegal?)

How's France Edmundo?

 

This is only effective on bonuses paid in 2009:

(g) Effective Date- This section shall apply to disqualified bonus payments received after December 31, 2008, in taxable years ending after such date.

Anybody know which firms got their bonuses in december 08 and which ones were in 09? I know Merrill was in 08, and I think maybe MS and GS. Any others? I heard JPM was just recently, so they are screwed. AIG is a given. What about Citi? Non-Merrill BofA? Others?

 

Ironic. That's how France is.

Lately the French government has been more American than the American government. Their response to the financial crisis was to initially fund a $27 billion Euro stimulus, and when that didn't go far enough, they added another $2 billion. According to Sarkozy, they will not add any more. The $29 billion will have to be enough.

In response, the powerful French labor unions launched a general strike yesterday. But, thanks to protective measures put in place by Sarkozy's regime, the strike went off with no notable disruptions whatsoever. Public transportation in Paris was unaffected and businesses were open. It may be a little premature to say so, but Sarkozy may have tamed the unions.

The strike was to complain about rising unemployment for the most part. Sarkozy's response is that the government cannot prevent companies from going out of business and laying people off. It is simply a function of the market. Gee, what a novel concept, especially coming from a socialist country.

The French people are very different from the American people, I'm afraid. There is an inherent distrust of government here, and the government is largely afraid of the people in France. Not so in America. Perhaps the French knew what they were doing when they buried the bodies of decapitated kings and queens so close to the Elysee Palace (the French White House).

The current batch of brigands in D.C. could use a reminder like that.

 

All those complaining that the founding fathers will be turning in their graves, where the fuck were you when the government was pumping in trillions of dollars? You think the founding fathers would have stood for big government bailouts? But no, at that time all you whippersnappers thought that government bailouts are required to keep credit and liquidity flowing.

That said, I am against ex post facto laws in principle. The correct course would have been to restrict government funded/sponsored enterprises from paying out those bonuses in the first place. However, since the payouts have already been made, I can't think of a better clawback mechanism. Can you? A little populist anger is justified here I think. (Oh, and don't even try to argue that these people deserve to be paid or else Wall Street will lose our best "talent"...)

Also, it's not like this is going to have an impact. Lawyers and lobbyists are already busy figuring out loopholes to this. Not to mention, that this doesn't even tax earnings in the boom years before 2008 which was what caused this reckless proliferation of complex financial products which Wall Street did not understand (oh yeah, and don't tell me that this is a Black Swan event - I've heard that one before too.)

 
abcx:
All those complaining that the founding fathers will be turning in their graves, where the fuck were you when the government was pumping in trillions of dollars? You think the founding fathers would have stood for big government bailouts? But no, at that time all you whippersnappers thought that government bailouts are required to keep credit and liquidity flowing.

If only you'd bothered to read before assuming, I think you'd find most of this board has serious doubts about the bailouts (at the least) due mostly to moral hazard issues.

abcx:
A little populist anger is justified here I think.

I'm pretty sure that's the same argument that was used to justify lynchings.

 
drexelalum11:
If only you'd bothered to read before assuming, I think you'd find most of this board has serious doubts about the bailouts (at the least) due mostly to moral hazard issues.

Yeah, just look at the guys against the bailout in this thread. They want to go to med school because the bonuses in banking aren't going to be large enough now. I guess it's all about the money. Or the OP who wants AIG to nuke the Dow to show Washington who really runs the country. Yup, they're against the bailout because of "moral hazard" concerns. Sure. These guys have great "morals". Not only do these posters (and I imagine the people on Wall Street are similar) not feel any remorse, but they are still intent on raping the economy/taxpayer for whatever is left and then leaving the remnants to burn in flames.

Keep smoking whatever you are smoking.

 

Because having the government take money means it's going right back to the peasants and middle class, right?

Shut the fuck up. Mortgage traders aren't the same as bankers. These people get paid because they create value -banks can't ask for whatever commission they want.

If it wasn't important, there wouldn't be a market for it. I'm not going to work 100 hours a week for the same hourly wage as a barista.

 

Disgusting, some liberals believe that having wealth is like a mental disease that the government should alleviate by taxing them into oblivion. Taxing in a depression is so retarded that I feel Obama's "Special Olympics" gaffe may in fact mean that his bowling is like the Special Olympics because he is mentally retarded.

Since when are traders rewarded "jest because"?!? The liberals and pols want to blame the MBS traders but the bad ones were fired and the rating agencies I think were more at fault. Whoever got the bonus money at AIG, Goldman (they got 10 bn), JP Morgan, etc. either were needed to get it contractually or they got it becuse of performance. Its not like the CEO's look at every single trade and say..."Hmmm I think that the entire MBS division should be shut down because everyone thinks that its safe and we're making alot of money". Its fucking ridiculous!

Even the CEO's should get some money, people are outraged at the CEO who got like $1m and people who got like $10k. Comon since when is that alot of money for the jobs that they perform? Why should the government "reclaim" money that people earned? If the fuckinng Congress didn't raise their salaries every session I would understand a bit more. Also since when is there a $100% tax (the bill proposed this for some)? Why even work in a job with a bonus? Traders are paid grotesquely low salaries because of their bonuses!

THe point of the bailout is so people keep their jobs and spend the money in the economy. Is this not the complete opposite of that idea!?! AIG should have been let to fail in the first place in my opinion. Some of the poeple could have found jobs that paid the same amount as their base at AIG and have a bonus too!!!

B. Hussein Obambi is trying with al his might to destroy what IS America and what IS capitalism!

So what do you do? -I work for an investment banking firm. Oh okay; you are like my brother, he works for Edward Jones. -No, a college degree is required in my profession

Reality hits you hard, bro...
 

Here's an interesting fact for you all. In the State of New Jersey, assuming that the legislation passed today is actually a 90% tax on bonuses (I haven't read the bill yet, although I plan to this weekend so I can better comment on the situation), for every dollar awarded to employees of firms that received 5Bln or more in TARP Funding, for a household making 250K or more a year and that falls into the highest tax bracket, the net figure, on a per dollar basis is that for every one dollar received gross, the person will receive half a penny net. A 1MM Bonus has an actual after tax payout 5,000 dollars. On top of the 90% from the bill, NJ's highest tax bracket has a 9% income tax rate and a 1/2% fee because it's NJ and they charge fees for everything.

How's that for really getting fucked in the ass by this? Now, I'll be back later with comments on the political side, but chew on the above and enjoy that little tidbit.

 
Frieds:
Here's an interesting fact for you all. In the State of New Jersey, assuming that the legislation passed today is actually a 90% tax on bonuses (I haven't read the bill yet, although I plan to this weekend so I can better comment on the situation), for every dollar awarded to employees of firms that received 5Bln or more in TARP Funding, for a household making 250K or more a year and that falls into the highest tax bracket, the net figure, on a per dollar basis is that for every one dollar received gross, the person will receive half a penny net. A 1MM Bonus has an actual after tax payout 5,000 dollars. On top of the 90% from the bill, NJ's highest tax bracket has a 9% income tax rate and a 1/2% fee because it's NJ and they charge fees for everything.

How's that for really getting fucked in the ass by this? Now, I'll be back later with comments on the political side, but chew on the above and enjoy that little tidbit.

In Illinois the new Governor is pushing for a 50% increase in income tax STATEWIDE. Though the tax will then only be 4.5%, it would be the largest tax increase in state history.

 

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