The Backlash Against the AIG Tax

Financial Times: Banker Fury Over Tax "Witch-Hunt":

Bankers on Wall Street and in Europe have struck back against moves by US lawmakers to slap punitive taxes on bonuses paid to high earners at bailed-out institutions. Senior executives on both sides of the Atlantic on Friday warned of an exodus of talent from some of the biggest names in US finance, saying the “anti-American” measures smacked of “a McCarthy witch-hunt” that would send the country “back to the stone age”. ...

“There are three big industries where the US has global leadership: financial services, media and technology. Introducing this 90% tax is like taking one of those industries out the back and shooting it,” said a top Wall Street executive.

In Frankfurt one employee at a US investment bank said the new tax measures would “send [the US] back to the stone age.”

Wall Street Journal: The 102% Tax: Forget Stabilizing the Financial System. Congress Is Hungry for Revenge, by James Taranto:

[S]ome employees would end up being taxed on their bonuses at an aggregate rate exceeding 100%. Bonuses are also subject to the Medicare FICA tax of 1.45% (not counting the employer's portion), bringing the total federal take to 91.45%. Employees are also liable for state and local income taxes, which would not be deductible from the bonus tax. For an employee living in New York City, the state and local rates are 6.85% and 3.648%, respectively. Add it all up and the tax liability comes to 101.948%.

Wall Street Journal: The Backlash Against the AIG Bonus Backlash, by Stephen Grocer:

There seems to be a backlash against, well, the backlash.

The flap over the AIG bonuses spurred the House of Representatives into quick action. But instead of a measured, well-reasoned bill, the House passed a bill that was more about revenge. The legislation would impose a 90% surtax on bonuses granted to employees who household’s income is more than $250,000 at companies that have received at least $5 billion from TARP.

The Business Insider:  Anger and Panic At Goldman Sachs Over 90% Tax, by John Carney:

Goldman Sachs was solidly behind Barack Obama. Indeed, Goldman Sachs has long had the reputation as the investment banks with the most Democratic supporters on Wall Street.

But the vote earlier this week to impose a 90 percent tax on bonuses at TARP supported banks has many at Goldman feeling betrayed, fearful and angry.

"Fuck Obama," one person said aloud on the floor, giving voice to the feeling of political betrayal.

Word spread quickly that because the bonus tax only applies to TARP recipients, foreign banks wouldn’t be covered. At least a few people at Goldman Sachs have already called recruiters. And recruiters have stepped up efforts to poach Goldman employees offering jobs safe from the TARP bonus tax.

The Business Insider:  90% Tax? Now We Really ARE Screwed, by Henry Blodget:

The frantic passage of the Populist Rage Tax was a new low in the US government's response to this crisis. It shows just how likely we are to doom ourselves to a decade or more of misery--by choking our markets, closing our borders, turning our banks into tools of social policy, and wrecking what's left of our economy.

The Volokh Conspiracy: How About a 90% Tax on Some of the People Who Caused This Mess?, by Jim Lindgren (Northwestern):

I was thinking: How about imposing a 90% tax on the income over $100,000 of some of the people who caused this mess? Perhaps not at the top of most lists, but fairly near the top, should be Christopher Dodd, Barney Frank, and the leaders of Fannie Mae, Freddie Mac, and ACORN. If Congress is going to target unpopular people who make larger than average incomes, it should start with itself (and its sources of campaign funds and workers).