Take a look at where we are today:
A) Taxes are going to confiscatory rates. Examine the bill written by tax cheat Charlie Rangel, the Democrat Chairman of Ways and Means. Under his bill, the tax on any bonus paid to a New York City resident by a TARP recipient bank would be 102 percent for any family with an income above $250K.
The Wall Street Journal explained it clearly. First, the bonuses are taxed at 90%. 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%.
$250,000 may seem like a lot of money to most Americans. But in a city where public schools are a wreck, financial executives may understandably feel they have no choice but to send their children to private schools. Tuitions in New York City range between $35,000 and $45,000.
B) This year’s federal deficit will be 13 percent of GDP, compared to 2-ish percent under Bush’s last budget. The Congressional Budget Office says (today) that our deficit will be over 1 trillion per year for 10 years under Obama’s plan. The CBO is non-partisan, but under the control of the Democrats. This is the highest deficit creation since WW2. Our public debt as a percent of GDP will rise from 40 percent (today) to 70 percent by 2012. What are we, Greece? A superpower cannot run these debt levels.
C) The finance industry, which was a US dominated industry, is being killed by President Obama. Reason: foreign banks do not have the compensation caps that Obama wants to impose… Talented people are spending their time seeking jobs with non-US banks.
John Maynard Keynes would have been appalled by the de-emphasis of infrastructure in our budget bill. And he would have howled at proposed tax increases during a recession. Supply-sider or not, low taxes are good. Controlled government spending is good. A sound currency is good. President Obama will be challenged less by incompetent Republicans than by his own hubris and wrongheaded philosophy.
14 responses so far
1 ChristianMiller // Mar 25, 2009 at 7:19 am
How dare you call Rangel a “tax cheat”. You are sounding like that blowhard Limbaugh. I supose you want Obama to fail too! People don’t want to hear this kind of divisive talk about our elected representatives. What are you, some kind of NASCAR creep ?
Seriously, what exactly are you going to do about all this anyway? Re-elect Spector?
2 Bulldoglover100 // Mar 25, 2009 at 7:57 am
LOL Grow up Street Scene and get rid of the anger and deal with reality, MOST of the problems that lead to your laundry list of ills were caused by the Republicans leading this country the last 8 years. Until we take responsibility for our part in the problems facing this country today we are bound to repete them…if we get the chance.. The way some in the GOP are acting these days? We will never get another chance to FIX our own mess.
3 barker13 // Mar 25, 2009 at 9:30 am
(*CLAP-CLAP-CLAP*) “…tax cheat Charlie Rangel…” Bravo! Good for you, NM! Let me second that… under my REAL name… William R. Barker, Harriman, NY. (*WINK*) Next: “101.948%.” (*LAUGHING OUT LOUD*) Yep. God bless the WSJ. Next: “$250,000 may seem like a lot of money to most Americans.” Umm… actually NM… $250,000 is a lot of money. To those of you fixated upon “winning” over sticking to principle, I can think of NOTHING a Republican can say that is more liable to backfire in terms of public opinion than that “seems” statement just advanced by NM. (*SHRUG*) Next: “What are we, Greece?” (*LAUGHING OUT LOUD*) Oh, NM… go over to your home bar and pour yourself a snifter of the good stuff in self-congratulation for that one! And next… start drinking straight from the bottle because bottom line… you’re right – Obama and the Democrats are DESTROYING our country. BILL
4 Tom B // Mar 25, 2009 at 2:11 pm
Bulldog: Little history, actually quite recent. Dems controlled the House and Senate in 2006. Which actually means that Bush did not control the country for 8 years, more like 6. Unless of course you are of the opinion that the full majority of Dems in both houses lacked the gravitas to stop one man. Like when Bush fooled all the Dems to vote for the Iraq war, then the Iraq surge. Actually fooling the Dems into thinking they were not the majority, causing them to vote with the Republicans, thus furthering the legislative demands of the dumbest President ever. Ya those Dems.
5 sinz54 // Mar 25, 2009 at 2:16 pm
1. The finance industry was dead before Obama took office. It was killed by overinvestment (or should I say overspeculation?) in derivatives tied to mortgage-backed securities.
2. I have no sympathy for any executives taking TARP bailout money. If they want to have their bonuses without tax penalties, there’s a simple solution: Act like men, return the TARP money, and file for Chapter 11. Then they can vote themselves whatever bonuses are possible under bankruptcy.
6 barker13 // Mar 25, 2009 at 2:28 pm
SDspringy — 2007. You meant the Democrats have controlled both Houses of Congress since January 2007. Excellent point; one I regularly make myself; one apparently most media movers and shakers aren’t aware of since you never see any of them bringing it up in context – let’s say during an Obama presidential press conference where Obama is claiming that before he became President Democrats had nothing to do with running the government (into the ground). Sinz54 — Also a good point re: TARP. Hey… re: TARP there are two sort of people – people who OPPOSED the “rescue” (me for example) and folks who favored it (Bush/Obama/Pelosi/Reid… et al.) BILL
7 fact based // Mar 25, 2009 at 2:38 pm
if you really believed in capitalism half the jobs on wall street would be gone because the companies would have gone bankrupt, Obama killed the finance industry ? give me a break he wasnt the one who told you guys to leverage up 30:1 with toxic assets,
De emphasis of infrastructure in the current budget ? As opposed to what ? the emphasis on spending on iraqi infrastructure (with most of the money going down the toilet) for the last 5 years ?
what tax increases are proposed in the current budget ?
do you support the repubs brilliant idea of no new spending in the recession (herbert hoover econ) ?
if you are worried about the deficit do you support repub tax cut proposals ?
btw the 90% bonus tax bill will never even make it to the senate floor
8 sinz54 // Mar 25, 2009 at 5:11 pm
Fact based: What do you mean by “You guys”??? I’m not wealthy enough to have invested in mortgage-based derivatives. Heck, I’m driving a 12 year old car.
I was stunned when I saw the level of sheer irresponsibility and stupidity on Wall Street. Sellers of mortgage-backed securities paying the rating services (like Moody’s) to overrate their securities–a blatant conflict of interest for those rating services. And investors then believing those ratings, and snapping up those securities as if they were going out of style.
This mania dwarfed even the “dot.com” mania of a decade earlier, because as you say, this mania was leveraged up to 30 to 1. (Federal regulations limit investing in stocks to a 2 to 1 leverage ratio.)
9 sinz54 // Mar 25, 2009 at 5:13 pm
barker13: The mania in mortgage-backed securities and Credit Default Swaps (CDSs) was already nearing its peak when the Democrats took over Congress in January 2007. The peak occurred just eight months later–then housing prices began to decline.
10 barker13 // Mar 26, 2009 at 6:29 am
re: Sinz54; 5:11 pm — Sinz… I’m driving a 2008 Dodge Charger RT, inferno red with the 5.7L HEMI. (*GRIN*) I picked it up last month, used, 5K on the odometer, for $19,500. I’m not rich either – just a competent shopper with excellent credit who lives within his means and tends to get the most bang for the buck. (My point…??? Just piggybacking upon your 12 year old car comment in order to sing the praises of my new toy!) (*WINK*) (BTW, we’re in agreement; I too was wondering who FactBased was referring to as “you.” Next… re: Sinz54; 5:13 pm — Credit Default Swaps were invented in 1997 by a team working for JPMorgan Chase. The “Swaps” became largely exempt from regulation by the SEC and the CFTC with the Commodity Futures Modernization Act of 2000, which was also responsible for the Enron loophole. President Clinton signed the bill into Public Law on December 21, 2000. (Hat-tip Wikipedia) As to the housing market… com’on… while certainly the Republicans were not blameless, it was for all intents and purposes actual Democratic Party ideology to stretch the connection between creditworthiness and home loans beyond the breaking point of economic rationality. Again… many, I’d even stipulate most, Republicans went along with the pandering and “let the good times roll” cheering section, but if we were to expand this thread to really dig into the history of the housing mess I’m guessing even you realize that we’d be able to point to certain Republicans (conservatives) at least TRYING to shut down the flood gates prior to the… er… doo-doo… hitting the fan. (*CHUCKLE*) BILL
11 ModerateGal // Mar 26, 2009 at 12:43 pm
Honestly, Mr. NM Street Scene, if you want me on your side in a discussion, you’d be wise not to include, “$250,000 may seem like a lot of money to most Americans. But in a city where public schools are a wreck, financial executives may understandably feel they have no choice but to send their children to private schools. Tuitions in New York City range between $35,000 and $45,000.”
Oh, those poor put-upon financial executives! No choice but to put their sweet, little children in a $35,000 per year school. Really.
12 dragonlady // Mar 26, 2009 at 8:10 pm
Moderate Gal–I have an idea. Let’s go with the mob mentality and tax the crap out of the so-called rich. And drive down the value of the institutions that we, as the taxpayers, now have our fingers in, and wonder why private investors are hesitant to share the burden with us on them. And better yet, let’s cancel all the bonuses for all companies who took gov’t $, even if the execs there had nothing to do with the meltdown, or did not have to take gov’t $, but where asked to by the gov’t to participate in TARP. And while we’re at it, drive the talented execs into the arms of foreign firms who do not have any compensation caps. As Norcea of the NYT said best, let’s commit economic arson against ourselves.
13 ModerateGal // Mar 27, 2009 at 9:20 am
Dragonlady, I do believe that you missed the entire point of the article above. It was simply about taxing the bonuses. Not taxing the crap out of the so-called rich.
Why would taxing bonuses “drive down the value of the institutions that we, as the taxpayers, now have our fingers in”? There is absolutely no logic in your statement about that at all.
And better yet, let’s cancel all the bonuses for all companies who took gov’t $, even if the execs there had nothing to do with the meltdown — Exactly. If a company has no profitability, then no one should get bonuses!!!! Bonuses should be dependent on a companys overall total profitability!!! — I can only assume that you are not involved in Corporate America at all.
And, if these executives were so talented, they wouldnt have trashed their companies. Good riddance to bad rubbish. I personally believe that the United States of America is filled with brilliant people, and that the current Good Ol Boy group that are at the top can be replaced with smart Americans quite easily. I believe that it is unpatriotic to think that only those who are currently at the top of those companies are capable of running them (or running them into the ground as the case may be).
14 dragonlady // Mar 29, 2009 at 7:52 am
ModerateGal, where to start–this article is pointing out we’re killing the finance industry. To some folks, this is all part and parcel of class resentment and taxing the rich. Your insinuation that someone is unpatriotic because they disagree with you on this issue really shows the weaknesses of your argument. Also when you quote someone, don’t take their statement out of context–you left out a key part of my argument where I said the govt asked some companies who really didn’t need TARP $ to take some anyway. These companies like Wells Fargo are performing–do you want all their financial execs to give back their bonuses too or be taxed at 90%? If someone made obscene amounts of profit running a company into the ground as you put it, we should go after them on criminal charges versus passing laws of dubious constitutionality. I don’t want the govt running around retroactively punishing people by essentially cancelling private contracts without due process for the purposes of political grandstanding, nor do I want them to publish the names of folks who are subject to death threats. Or if you want them to renegotiate the contract and do away with bonuses, force them into Ch11. We have plenty of reason to be angry with the financial sector right now, but a law that attacks the entire sector by taking away bonuses is quite unhelpful. A lynch mob mentality does not help recruit smart people, as you put it, or even keep the folks in place that may be actually trying to help their companies. Why would smart people want to go into a sector where the business rules are constantly be rewritten by gov’t? Finally, by turning these companies like AIG into a pariah, we’re destroying the value of the company. How do you expect AIG to repay the taxpayers if were driving private investors away from them?
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