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March 21, 2009
New Bonus Taxes will Slam us!
If the Democrats in Congress get their way, these new bonus taxes could, in my opinion, be the final blow that knocks out our local economy and local real estate prices.
With Obama leading the way, the future of free market capitalism in this country looks bleaker and bleaker every day.
It's the perfect storm -- bad economy + Socialist/Democrat President and Congress. The top talent will move abroad to work and the US economy will tank further and further.
At least McCain wasn't a Socialist.
http://www.latimes.com/business/la-fi-bonuses21-2009mar21,0,2125832.story
Comments
Hey IB:
"The top talent will move abroad to work and the US economy will tank further and further."
I wish all the so-called 'top talent', that is, the folks that got us into this mess, would indeed move overseas. Maybe they could work their financial engineering magic somewhere like say, Russia? At least there they know how to deal with failure, and it ain't by raising taxes!
Posted by: denton at March 21, 2009 7:27 AM
Denton,
That's complete bull. Lots of factors got us into the mess. You're just following our foolish leader, Obama, and trying to find scapegoats. The morons who took out mortgages with no ability to pay them off are just as guilty as the bankers, mortgage brokers, and government regulators who facilitated them.
Everybody is to blame who paid crazy prices for properties that sold for much much less just a decade ago. All you recent buyers bought into the "ponzi scheme" mentality that sky high prices make sense because "real estate prices always go up". And incredibly, you folks still believe that today.
Everything is still drastically over priced and our government's efforts to "pump-up" the ponzi scheme and start the clock again will, over time, drive our economy deeper and deeper into the abyss.
Posted by: IronBalls at March 21, 2009 9:44 AM
Thanks for the economics lesson Mr. Hoover.
I mean really, after what The Republican has done to this country, I wouldn't even take a restaurant recommendation from it.
Posted by: SJ at March 21, 2009 9:59 AM
Ironballs,
You've actually made me laugh this morning. I've never been compelled to post a comment before, but just a point of clarification...
These new bonus taxes will not be the final blow that knocks out our local economy and local real estate prices.
First of all, these bonus taxes are STRICTLY for employees of companies who received over $5 billion dollars in bailout money. These employees also have to earn over $250,000 per year.
In addition, Congress is considering passing a similiar bill for smaller companies who received under $5 billion dollars. If this passes, the employees of these companies will be taxed at a substantially lower rate.
This legislation will not knock out our local economy. A great majority of individuals owning property and businesses do not necessarily earn over $250,000 per year.
Posted by: iheartbrooklyn at March 21, 2009 10:13 AM
Don't insult our new President.... What have and what can the Republican do???? We saw what they did for eight years...
We need positive solutions which is what President Obama is trying to do....The mess that he has inherited isn't not easy to clean up... I don't appreciate u calling him stupid...I guess Bush was smart and articulate!!!!We won't turn this into a site to Bash the President...
Posted by: PC at March 21, 2009 11:44 AM
PC. Right not stupid, merely mentally handicapped -- as he said
himself, Special Olympics material.
Posted by: daroogle at March 21, 2009 4:03 PM
iheartbrooklyn,
I know all that. But it's still a major strike to the jugular for many folks who work in finance. Who do you think can afford million dollar plus housing, folks making less than 250k or more than 250k?
It's insane that after investing/loaning billions to these failing financial institutions, the government later decides to change the rules because voters are upset about bonuses being paid by TARP recipients. How do you expect these financial giants to right themselves if they aren't allowed to highly compensate the best employees? Who's going to run things, a bunch of recent college graduates with experience mowing lawns?
Do you really think the best talent will work for peanuts and lemonade?
It's one more BIG blow that our very fragile local economy will not take lightly.
Posted by: IronBalls at March 21, 2009 5:07 PM
Obama seemed to have the personality to deal with this mess, but he's lost control of his people. Nobody is buying Geitner and having the idiot Congress pass knee-jerk bonus tax bills is bush league. He needs to control the agenda.
Posted by: jawbreaker at March 21, 2009 5:59 PM
Let's face it, in the midst of this crisis there's a witchhunt going on. It's understandable, distasteful, and ultimately a distraction from more important issues. AIG is a complex mess that still hasn't been sorted out and a couple hundred mil in bonuses is irrelevant in the grand scheme of things. But what this clumsy legislation is trying to do is speak to the need for a rejection of the warped values that got us here in the first place. Frankly, in the current climate, financial sector professionals should be happy just to retain their jobs. Thousands and thousands have been already been laid off on Wall Street and most will be happy to land a full-time job with standard benefits -- nevermind the bonus. As for going overseas, look around. This is an international collapse and many other countries are far more protectionist than they admit. If in the midst of this difficult time we can recalibrate our society so incomes are more level across diverse professions, it will encourage smart young people to go into careers like science, the enviroment, the arts, teaching, manufacturing industry and the like and be a huge win for the country in the long term. Personally, I'm prepared to accept lower home prices (and yes I own a brownstone) to live in a world with a more stable middle class and a smaller income gap between rich and poor. Socialism? Bring it on.
Posted by: 1929 at March 21, 2009 8:30 PM
OK,
I have a solution. Convert all of the bonuses to stockholder options so that they are rewarded if the company turns around...
Posted by: slick at March 22, 2009 12:31 AM
1929,
You sound fairly smart. What are you smoking? Socialism is a proven failure.
If Obama's expansion of government intervention continues, there won't be a stable middle class. There will be a growing stable lower class relying completely on government handouts to get by.
America has proven that free market capitalism can work. Just because the system screwed up big time, doesn't mean regulatory changes can't be made so this doesn't happen again.
Killing performance compensation is a dagger thrust to the heart of capitalism.
Obama and his Democratic buddies in Congress are just a bunch of pandering thugs.
Posted by: IronBalls at March 22, 2009 6:56 AM
Why do everyone keep saying socialist!!! I was born and grew up in a socialist country and trust me we are no where near being a socialist country.... America is the greatest place in the world....I don't think the average person have a clue at what living under Socialism is all about ... Stop saying we're going Socialist.....
Posted by: PC at March 22, 2009 8:31 AM
PC:
Couldn't agree more. The socialism charge is really just to scare people who don't know what socialism actually is into believing the Rebublican's lies.
Balls:
Not sure exactly what economics playbook you're working off, but you've pretty much got it completely wrong. It's your kind of thinking exactly that has driven America to the ditch that were in today.
Posted by: SJ at March 22, 2009 8:59 AM
Iron Balls,
FYI, I actually happen to work in finance. I have no issues with companies highly compensating their best employees. My issues stem from compensation packages paid with
tax-payers dollars.
Many financial institutions claimed that they needed financial help from the government in order to stay afloat.
What people seem to forget is that if any of these financial companies had ceased to exist, there would be NO monies to compensate any of these employees.
There are several companies that refused bailout money and are not subject to the rules being imposed by government. If any financial institution does not like the heavy taxes being levied by government, they should return all tax dollars to congress and pay there employees whatever they want. They cannot have their cake and eat it too.
Posted by: iheartbrooklyn at March 22, 2009 9:41 AM
IronBalls - I do not think this law will do anything. For example if I work for a firm in subject and government asks 90% in taxes, I will ask the firm to take my bonus back. Who cares - I will not see these money one way or another. But in a little while (when the law expires) the firm might want to give me something again. Why anybody in its right mind will throw whole bonus to the government?
as for the remarks about "foolish president": I far as you can see Obama actually tries to slow down this stupid bill. Republicans and democrats in the house try to show to their voters something and create this bill.
And finally AIG was stupid. They did not understand systematic risk in CDS insurance. They combined entities with low systematic risk (i.e. life insurance) and the entity with high systematic risk (the financial products). This is clear violation of life insurance contracts they created. In other words if I have life insurance with AIG, I expect this entity to have enough money to cover it. If they combined entities, they as well combined risks. It means that if "Financial Products" will go under, then it will pull my life insurance as well. I am not sure what kind of "top talent" they are talking about. This is pretty simple issue and any executive must see it... as well as regulators.
Besides 165MM bonus for 450 people is 300K/person - not that a big deal.
I am not associated with AIG
Posted by: bobjohn at March 22, 2009 1:32 PM
iheart,
Again, I understand where you're coming from, but you can't have your cake (saving AIG and other large financial institutions) and eat it too (retain top employees while paying them far less than they could earn working elsewhere).
I'm against all the bailouts and believe bankruptcy would have been a more efficient route to eventual economic recovery, but since the effort was made and so many billions of tax payer dollars were put up to "save" these companies, I can't see why spending a few hundred million dollars (a small fraction of the total aid package) to retain the best people is a bad idea.
Posted by: IronBalls at March 23, 2009 6:26 AM
Maybe campaign contributions from the companies who received bailout money should also be taxed. Check out all the top dem's who received money from AIG...
Posted by: pig three at March 23, 2009 7:36 AM
oh dear....manufactured outrage is the worst kind...
Posted by: the chicken at March 23, 2009 8:54 AM
It's too funny to read Democrats and Republicans square off against each other, as if there's any difference. Neither of these crime families, I mean, political parties, is innocent in the debacle, nor are all the idiots, of all income levels, who lived beyond their means for the past decade.
Posted by: pjsubway at March 23, 2009 9:21 AM
I really wish people who comment on economics had even a cursory understanding of the field. I feel like I've been listening to plumbers pontificate on heart surgery lately.
Posted by: byndcivilization at March 23, 2009 10:46 AM
ironballs- we are not going "socialist", our President is not a socialist, and as far as "Do you really think the best talent will work for peanuts and lemonade?"- they should because all that best talent was too stupid to prevent this mess. In fact, they helped create it.
As someone in one of those big firms said, claiming that money is needed to keep top talent is bs. where are they going to go in this economic market? They'll be thrilled to keep the job they have.
Posted by: bxgrl at March 23, 2009 10:59 AM
> "Killing performance compensation is a dagger thrust to the heart of capitalism."
Richly rewarding people for total failure is a much bigger dagger. If those "best and brightest' want to walk, let them.
Posted by: SnarkSlope at March 23, 2009 12:15 PM
Ok Snarkslope,
Then what's the point of the bailout in the first place?
Why spend billions on corporate bailouts and then stack the deck against those companies you're trying to save so they're at a major disadvantage against their competitors because they can't pay bonuses.
This isn't about Democrat versus Republican. It's just plan stupid.
Posted by: IronBalls at March 23, 2009 12:46 PM
bxgrl,
Plenty of bankers have left TARP banks and taken other jobs.
High level financiers with years of experience can still find work even in this economy. Mid level and lower level folks might have trouble, but the super smart, connected guys can always find work.
Posted by: IronBalls at March 23, 2009 12:52 PM
> "Then what's the point of the bailout in the first place?"
An excellent question.
Posted by: SnarkSlope at March 23, 2009 1:49 PM
Dear byndcivilization,
Please do not point to plumbers in this tone.
MP and eman very respected here. Besides they understand point of creating segregated entity (i.e. LLC) instead of working as self-employed and put their potential plumbing liability onto their household.
Posted by: bobjohn at March 23, 2009 10:21 PM
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