I am looking forward to seeing Martha Coakley sworn in as our State’s new U.S. Senator later this month. One of the issues she has rightfully been outspoken about is the need to hold “the big banks and scam artists that got us into this mess” accountable for the financial and credit crisis we currently face.
One good way to do that would be to tax the windfall profits that Goldman Sachs and other financial institutions are using to fatten their own wallets through record bonuses: this despite the fact that those profits have largely been gleaned off the back of the Government’s (i.e. taxpayer’s) massive injection of liquidity and capital and could be better used shoring up their own books and/or lending it to struggling small businesses.
Britain and France are both in the process of imposing one-time levies on bank bonus pools this year. So why not us? The New York Times recently editorialized in favor of the idea writing:
Bankers have rushed to repay their bailout loans to the Treasury so they can avoid the constraints on compensation that came with the assistance. Unshackled, they are putting together bonus pools for 2009 that would rival the record-breaking packages of 2007 – the year before their foolhardy bets tipped the world into its worst economic crisis since the 1930s.
The administration (and/or Martha Coakley – I added this) can make a very good case that the Treasury is entitled to much of this money. After all, what profits the banks have made over the last year were funded by oodles of cheap financing provided by the Federal Reserve. This is a windfall that they should not be allowed to keep.
We can think of a lot of good ways to use the revenue from a windfall tax, starting with a more robust program to create jobs for out-of-work Americans.
Martha Coakley has a strong track record in fighting against financial malfeasance (such as bogus foreclosure prevention schemes and other forms of predatory lending) and if she does get a spot on the Senate Banking, Housing and Urban Affairs Committee would be well placed to keep up that fight. And lucky enough, just as she enters the Senate, Chris Dodd’s big financial regulation bill should be hitting the floor for debate. Could be a good place to offer the windfall bonus tax as an amendment.
I’m sure the powers that be in the Senate would prefer her, as Senator No.100 in the pecking order, to sit back and just vote how they tell her for the first six years. And taxing banks’ windfall gains is just the type of uncomfortable issue they’d rather not discuss because it would be hard to vote against but Wall Street and its lobbying hoards will be using every buck they give in campaign bounty as a threat over Senators’ heads to silently kill it.
But that is what makes the issue so great for Martha. It shows she ain’t messing around from the get go, is serious about holding the folks that got us into this financial mess to account and is not scared of special interests or willing to wait until she’s 65 to make an impact in the Senate. Offer something like this and while she may piss off the club, she will also gain their lasting respect.
Of course such a tax clearly is not even close to what is needed to tame a financial sector grown too big and too arrogant. But it is socially just given the pain caused by the financial crisis, and economically efficient given that bank bonuses this year are nothing more than a reward for staying in existence and do little to support the wider economy.
So how bout it Ms. Coakley – make a bank bonus tax your first act in the Senate? The time is right and you are well placed to carry on the fight.
BMG “Questions for Martha Coakley on Civil Rights”
If you have concerns, contact her campaign, but this diary was not about that. Your link doesn’t work anyway.
“Questions for Martha Coakley on Civil Rights“
It should. Maybe tomorrow we could pick another group, then another group…
<
p>It’s just bad idea.
but of the banks bonus pools. The bank would pay the tax.
<
p>The Constitution bans bills of attainder as you describe I think, but that is not what this would entail. Britain had to devise its levy to avoid making it direct on specific individuals as well so it would not fall afoul of the European Convention of Human Rights. A bill like this could do the same to get around constitutional problems.
Bonuses can be taxed, even at a different rate than regular income, just like lottery or game show winnings. In fact, there is no restriction on the application of the 16th amendment. Given that many of these bonuses are being given out by companies we bailed out, I think we are well within our rights to tax at least those. If you can come up with a specific clause in the Constitution to support your reasoning please present it.
If it can be done that way then good. But, if not, I am sure that it can be done somehow without triggering a constitutional issue.
Are not taxed at a different rate. They are included in gross income with salary, interst, rental income, and all other forms of gross income. You might be confusing the withholding on the lottery and game show winnings (in many cases withholding is required at the top rate) with the actual tax on such items of gross income.
<
p>You might be able to use the different rate on capital gains to make the same argument, but it seems to me that there’s a difference between singling out a widespread item of gross income for a lower rate than singling out a very specific itemif income for a higher rate.
Would these same taxes apply to all the folks at Fannie and Freddie that have received the largest level of support from the government to date, especially with the announcement on Christmas Eve that the Obama Administration via the Treasury Department had decided to provide unlimited support to both GSEs over the next three years after already having provided well in excess of $100 billion in support already?
<
p>These entities have new CEOs that were just granted multimillion dollar pay packages and these are entities owned by the Government! Isn’t it time that the Government walked the talk with pay and held the line on these two entities to show that they are serious?
As if the government could not get a competent CEO for $500k! I laugh until I cry.
“how are we going to keep the talent”. What they should be saying is “how are we going to keep the best crooks, liars and cheats”.
We are being robbed – robbed by an inbred, self-dealing, bloated elite that could well say, “Let them eat cake!”