Steve Chapman, as usual, keeps a cool head about things. And I’ve got some links at Point of Law on the remarkable House-passed proposal to slap a punitive tax on the compensation of many thousands of financial institution employees who are not even notionally to blame for the current crisis, as well as on the threats of violence to AIG employees, which are being met with complacency if not encouragement in some surprisingly respectable circles. Update: Point of Law post now considerably expanded, and with followups here and here.
The amount of vitriol at Boing Boing, is BEYOND frightening if they actually meet action with words.
I propose that these employees be made to wear green arm bands with a dollar $ign. It’ll be easier when we decide to round them up later.
If you read Best of the Web, Taranto was pointing out an interesting point if the 90% tax passes. When you add in Medicare, State and Local taxes the bonuses would be taxed at 102% (NY State is 6.5-ish and NY City is 3.5-ish, and Medicare is 1.4%).
The bonuses could end up being taxed at over 100 percent, factoring in federal, state, and municipal income taxes, Medicare tax, etc..
While taxpayers can usually deduct state income taxes, that’s not always the case, owing to things such as Alternative Minimum Tax, Pease personal exemption phase-out, and upper-income phase-out of deductions.
Moreover, even recipients who aren’t taxed at over 100 percent could end up worse off than if they received no bonus in some cases. Taxpayers can’t deduct some income-based legal obligations, such as child support, from taxable income. Child support is usually assessed based on pre-tax income under state child-support formulas. And state child support agencies have been known to set annual payments prospectively based on income inflated by one-time bonus payments — even if they are unlikely to recur. (By the way, in case you are wondering, I’m not divorced and don’t owe child support).
A low-paid bank employee married to a professional could be affected by such bonus taxes — say, a bank teller who gets a $10,000 bonus, if she’s married to a lawyer who makes $240,000 per year (bringing them up to the bill’s threshold of $250,000 per year). Her $10,000 bonus would basically be taxed away, as John Hinderaker notes.
Keep in mind that healthy banks were pressured into accepting federal TARP money so that unhealthy banks that also took it would not be stigmatized, as John Hinderaker, Thom Lambert, and John Berlau have noted. And their employees would now apparently be covered by this bonus tax.
[…] yesterday praised the House for passing a bonus tax that would make some employees of healthy banks pay over 100 percent in taxes and legal obligations. (The administration […]
Re the AIG Bonus controversy, is it somewhat surprising that the ACLU continues to maintain a deathly silence concerning the Bill of Attainder/Ex Post Facto Constitutional aspects of the punitive proposals put forth by the congressional Mob? Or is that one of those questions that answers itself?
[…] by praising the House for passing a 90 percent bonus tax, a tax broadened to cover not just AIG but also employees at other, healthy TARP banks. On March 22, the New York Times reported that the Administration […]