Paul L. Caron

Wednesday, May 4, 2011

A Surtax on Post-Government Salaries


A 50% surtax on anything earned within five years after leaving the federal government, above whatever the federal salary was. Leave a $150K job at the White House, take a $1M job with Goldman, Sachs, pay a $425K surtax.

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CSP's got it right: this is an enormous disincentive to anyone who had a market-rate job to take a short term government position. Given that Reynolds has also criticized the Obama administration for having few private sector folks in government positions, the nature of this misguided plan has a particular irony.

(And yes, I've written to him about the same obvious problem. To all appearances, he's ignoring it.)

Posted by: No_Rush | May 13, 2011 3:29:40 PM

CSP, nothing you said would dissuade me from thinking that this a good idea that needs pursuing. I've known enough "mid-level appointees like (you)" who intended to quickly convert their newly made government connections and contacts into (relativly) big money from civilian employers looking for those connections.

Maybe if there weren't hundreds or thousands of talented, but underpaid, people in trying to make work for themselves in various administrations there would be less power and influence for companies to try and buy after the people leave the government.

Posted by: SFC B | May 13, 2011 2:07:02 PM

That amounts to a 5 year non-compete clause, not on a specific "on any matter on which you work" restriction, but on "any job you take afterwards." I suspect there would be fair legal arguments against this; esp.considering that some people go on to lucrative employment in another field (such as a friend of mine who left a ranking securities enforcement job and now works straight transactional law) and others return, basically, to their same old job (see, e.g. Ted Olson).

Posted by: Joe Blow | May 13, 2011 12:05:32 PM

I see that Instapundit is linking to this discussion and is still pushing it. I emailed him a few weeks ago to try and dissuade him from this feel-good but not-particularly-well-thought-out plan, but alas, I didn't seem to get through.

I generally applaud strongly efforts to scale back excesses in government and crony capitalism, but I am a bit weary for these repeated calls for a 50% surtax on income beyond that earned in the federal government.

I would tend to believe that the example cited in Instapundit's original post on the subject — leaving a $150K White House job for a $1M Goldman Sachs position — is much more the exception than the rule. Having served as a mid-level appointee at a mid-level agency in the early days of the Bush Administration, I can assure you that, for every Goldman Sachs heavyweight you’d be punishing, you’d be punishing 40 or 50 “normal” mid-level appointees like me, who temporarily gave up an opportunity to make a (slightly) higher salary to serve our country for a period of time and then returned, most anonymously, to the private sector to resume earning the same (and slightly higher) market-rate salary which we would have been earning had we not been given the opportunity to serve.

The main effect of this proposal, as consistently reiterated, would not be to dissuade to once-in-a-blue-moon Goldman Sachs type. It would instead be to dissuade hundreds, if not thousands, of talented people from taking pay cuts to serve in presidential administrations if they knew that they would have to forego market rate salaries for five years upon leaving service. This would lead to that many more positions being filled by career bureaucrats and political hacks who wouldn’t have to worry about that potential forfeiture of pay because they would never be talented enough to earn it in the private sector.

I would urge those advocating for this surtax to strongly consider fine-tuning it to make sure it applies solely to the once-in-a-blue-moon Goldman Sachs types if it is to be advocated for at all.

Posted by: CSP | May 13, 2011 12:01:43 PM

"What about young Marines that leave service after their initial 4-year obligation..."

Enlisted pax are not officials. Only a commissioned officer who has "Commanding" in his signature block has any legal authority. Marines also technically can't be officials due to silly bureaucratic requirements that paperwork not be done in crayon.

Incidentally, the initial obligation is 8 years. You might do 4, 5 or 6 active, but the rest is IRR. Myself and all my buddies who were eligible have all been called back.

Posted by: cav | May 13, 2011 11:43:39 AM

The original idea was just for appointed officials. It could be expanded down to, say SES level. It also would be term limited, such as, for only 5 years after government service.

Posted by: hbp | May 13, 2011 11:24:39 AM

I'm not saying I agree with it, but at a minimum it should not apply to "line" people--people who get hired for a job and are in the GS or some other government salary system. This idea stands on better footing if it only applied to elected and/or appointed officials. A GS-7 going to night school to get a degree that will earn him/her a different job with a better salary in the private sector should not be punished for the sins of others.

Posted by: tax guy | May 6, 2011 6:56:35 PM

"What about young Marines that leave service after their initial 4-year obligation and go to work as a civilian DOD contractor? "
Easy - the tax will start at $100,000 or more.

Posted by: Paul | May 5, 2011 8:26:01 AM

Interesting idea. What about young Marines that leave service after their initial 4-year obligation and go to work as a civilian DOD contractor? Or is the analysis different if they go to law school on the GI Bill and become an attorney?

Instead of coming up with another crazy tax to try to influence peoples personal decisions, why don't we pull the tentacles of government back a bit so that regulatory experience and government contacts are not a carte blanche for success in every single industry of note.

Posted by: stephen shaw | May 4, 2011 6:12:46 PM