But it doesn’t take anything from the company. It taxes individuals paid by the company. Those individuals have no contract.
You’re assuming that the people whose bonuses are forfeit are the ones who explicitly asked to take taxpayer money. Is that the case? In my company, the majority of ‘executive bonuses’ are paid to people like district managers and regional sales leaders. It’s really more like commission than a bonus. Once you get promoted out of direct sales, you can no longer earn commission, so instead you get a bonus which is more like a commission on everyone’s sales. It’s an incentive for the manager to maximize sales, which he wouldn’t have if he were on straight salary.
This article says that the bonuses apply to somewhere between 2,000 and 7,000 employees of AIG - that’s up to 10% of the entire workforce. Not only that, but it does NOT include the 7 top executives OR the next 50 highest-paid employees, who had already agreed not to take bonuses.
So this is not at all targeting the people you say it is. Many of these people are not rich ($250,000 in income in Manhattan does not make you super-wealthy), and many of them make the bulk of their income from these bonuses. This isn’t Learjet money the Congress wants to take away, it’s the income of people who had the bad fortune to get caught in the crossfire between the Congress and their bosses.
Let me ask another question: Would you support a bill to increase the marginal tax rate for unionized employees of auto companies that have taken taxpayer bailouts? Say, enough so that their complete salary/benefit package is no greater than that offered by the other, non-unionized auto companies?
One final question: If the objective of the bailout is to keep AIG viable, is it not counterproductive to completely screw over thousands of its best employees, almost all of whom you can bet will be looking for other firms to move to? Isn’t this going to make it almost impossible for AIG to hire new executives? Or for that matter, any other bailout company? Who wants to set themselves up for a public stoning at the hands of Congress?
This whole thing is so stupid and Congress is behaving so badly it’s beyond belief.
This may be nitpicky but I’d call the 90% tax they just passed punitive.
This is wonderful. That’s my money and if the reports are true, most of the senior Dems in Congress, the Treasury, and the administration didn’t find out about the details about the bonuses until a few days before they were going to be enacted. Hell yes I want my money back from these greedy thugs
So if the banks fail, isn’t that what you Republicans want anyway? No bailout money, no government sponsored “socialism”, ask you guys like to scare people with? You’re trying to have your cake and eat it too and it’s simply hypocritical
Besides, even without bonuses, these are incredibly high paying, high finance jobs. You can bet that with an economy like this, there will be plenty of qualified, and ethical people, willing to come and do these jobs. Dump these clowns and get some decent people in there
Actually, it’s the Republicans with a 19% approval, probably due to their obstructionist ways and their blustering and fear mongering. Maybe they should shut up
Maybe you would, but the Supreme Court doesn’t.
So, something perfectly legal occurs. Congress finds it distasteful so they craft a law explicitly targeted at a very narrow group with the goal of undoing what was legally done.
That is really ok in a legal sense? Sounds awful to me.
Mind you I have no love for these jerks and I will not shed a tear for them but on a broader level what Congress is doing here is disturbing.
It’s funny - the UK are having the same issue with golden parachutes and in particular with one Sir Fred Goodwin, formerly of the failed Royal Bank of Scotland, who left the bank with a £693,000-a-year pension. This has naturally upset both the public and the government, so much so that the deputy leader of the Labour party vowed to get the money back, contract or no contract:
While I’m seriously appalled by the sums of money being given to people who have essentially destroyed the economies of several countries, I very much dislike this view by politicians that this is a justification for some highly questionable, morally shaky and potentially dangerous legislative wrangling. Surely this sort of thing condones further future punitive targetted taxation?
I know it’s just populist grandstanding, and chances are we will never see this money again, but dammit if I don’t love this.
The really funny part is the Republicans don’t know how to act…
WARNING. Lefty site.
Hereis a great example.
WARNING. Lefty site.
Not to throw facts into a rant, but Congress has a 30-40% approval rating, depending which poll you ask. And the Congressional Democrats score ~20 points higher than Congressional Republicans when compared party to party.
Well it certainly doesn’t make much sense to be trying to stimulate normal spending habits in the populace at the same time as any time anyone does anything but lay off people and save save save, they bash them over the head.
Spend! Wait no save! Wait, that’s no we mean go spend! Only…don’t!
They obviously have no idea what a stimulus package is actually meant to do, economically.
You’re missing a few steps.
Something perfectly legal occurs (a contract that stipulates bonuses are to be paid). A company’s management so completely screws up that the entire world economy hangs in the balance. The government steps in with public money to salvage the company and save the jobs of the people that signed the initial contract. Rather than use the money to recapitalize and unwind the mess they made (thanking their lucky stars that they are all still employed) the company uses the money to pay bonuses to the very people that caused the problem in the first place. The public finds it distasteful so they demand that their representatives get that portion of the money back.
Well what do you know. Congress’s approval ratings have taken a significant jump up in the last round of polls. I stand corrected on that.
Unfortunately, that makes me even more discouraged about the current state of the political winds.
How does this affect the “populace”? This is aimed at bonuses handed out to people who ran thier division so poorly that the “populace” had to bail them out.
Without the bailout, AIG would be bankrupt and not liable for any bonuses at all. The only reason they were paid out is because the taxpayers gave it to the company first.
Now, how is outrageous that they be asked to give it back to the people who gave it to them? How the hell are they entitled to it? When did it become “their” money and not ours? Did the WSJ explain that somewhere, Sam?
I think, given all the tough talk, and the “go kill yourselves” nonsense, it would be very hard to paint this as anything BUT punitive and political. I also have a “concern” that the wrong people would be punished by this (and it is punishment). I’m sure the real crooks (if we even find any) would have already found a way to cover themselves. The people hit by this most likely be the ones Scylla talked about in another thread - the ones who stuck around trying to fix things or at least make things less bad.
I’m not exactly comfortable with how this has been handled (by either side), but in the United States we are taxed on when the payment is effected and not on when the work was done (for the most part). So these bonuses should normally taxed in 2009. Not exactly retroactive.
Once I have an agreement to do “X” work for “Y” compensation then I am due “Y” compensation once I have performed “X” work.
If after the fact someone thinks it is bogus I got paid “Y” tough luck. The agreement was struck and the terms met.
The whole concept of contracts and agreements to do work for compensation gets turned on its ear if after the fact someone decides they think it was a bad deal and just takes it all (or most of it) back.
Did you read my last message? The bonuses in question do NOT apply to the top management of AIG. The top 7 executives and the next 50 highest-paid employees had already agreed to forego their bonuses. This tax will be applied to the other 2,000 to 7,000 employees in the bonus program at AIG, which means people all the way down to the office manager level.
I imagine the kind of person who could really be hurt by this would be a regional manager who has a base salary of maybe $125,000, but who could expect a bonus of another $200,000 if he hit his numbers for the year. His base salary alone would probably make him less well paid than some of the sales people under him. He’s working for the bonus, not the salary. So he makes his numbers, and he’s going to earn $325,000 for his work last year. Except now congress is going to tax his bonus at 90%, and suddenly the manager is making less money than his employees.
Now imagine you need a new manager because this one quits in outrage and goes to work for a non-bailout company. How many of those sales people are going to be willing to step up to the job?
It also creates an artificial distinction between those who earn their living mostly through bonuses vs those who simply draw high salaries. In my company, if you’re in the ‘sales’ track, you make most of your income through commissions and bonuses. If you’re in the engineering track, you can make the same amount of money, but it comes through salary alone. Why should the sales guys be punished, but not the engineers or lawyers or other professionals?
This kind of demagoguery is immensely destructive, because it leads to rash actions carried out in anger instead of what makes the most sense economically. I understand the anger at these bailouts, and the frustrations of people seeing wealthy people get bonuses when they’re out of work, but it’s the height of idiocy to give billions of dollars of taxpayer money to company to keep them afloat, and then to excoriate them in public and threaten their assets and frighten off their best employees. You want to see taxpayer waste? How about if after all those billions of dollars spent AIG goes under because it becomes an economic pariah due to the grandstanding of Congress and its use of punitive taxation to extract its pound of flesh?
Heaven forbid they might, I don’t know, do something capitalist and pull themselves up by their own fucking bootstraps.
Seriously, do you think these guys are going to turn up their noses at bailout money if it means their jobs disappear entirely? Have you not entirely clued into what a bunch of greedy self-serving pigs we’re talking about here? What are they going to do, suddenly grow a set of principles?
It became ‘their’ money when they met the terms of the contract they entered into to earn it.
How would you feel if your company accepted bailout money, and as a result the government decided that your own personal income was forfeit, but not the guy’s in the cubicle next to yours, because your form of compensation happened to be good fodder for the demagogues in Congress?
And let me ask you the same question I asked Diogenes: Could not your logic be applied to the union workers at GM? How about if Congress passes a law that says any salary of any union employee in a company that received a bailout shall be taxed at 90% if it goes over the average for non-union employees of other auto firms? Do you think that would be fair to the workers? After all, they’d be completely out of a job were it not for the bailout.
In the end, this is yet another reason why bailouts are a bad idea. Let the company go into bankruptcy, where there are established rules for dealing with things like employment contracts. If need be, the government could provide interim financing under chapter 11 if the financial markets are broken, but at least everyone would know what the rules are.