January, 13 2010, 10:37am EDT
In Wake of Latest Banker Bonus Outrage, Nation Needs an Immediate Federal Policy About-Face, Says IPS
WASHINGTON
Analysts
from the Institute for Policy Studies today called for a strong, swift,
and sustained federal response to the record bonus outlays that Wall
Street's top banks will shortly begin announcing.
"These billions in bank bonuses amount to money laundering on the
grandest scale ever," says IPS director John Cavanagh. "Hard-earned tax
dollars from average Americans have been transformed - via subsidies
and sweetheart deals from the Treasury and the Fed - into bonanzas for
the same speculators who shoved the economy into crisis in the first
place."
The Obama administration is reportedly considering a new tax on bank
earnings, but the plan is still undefined and would be unlikely to have
a significant effect on executive compensation levels.
"We need to get taxpayers their money back and take real steps to end
the pay gluttony that's made our economy a casino where only the
already rich can ever win," notes IPS Global Economy Project director
Sarah Anderson, who has analyzed executive pay trends for 16 years.
Lawmakers in Congress should work quickly to place on President Obama's desk legislation that would establish:
1. A financial speculation tax.
A modest tax on trades of stocks, bonds, options, and derivatives would
have little impact on trades that have a positive economic impact but
could reduce the volume of unproductive speculation that has been the
source of the greatest volatility - and profit-grabbing - in financial
markets. Such a tax, notes UK chief financial regulator Lord Adair
Turner, would reduce the pool of money available for executive bonuses.
A financial transactions tax could also generate significant revenue
for U.S. and global public goods.
2. An emergency 50 percent surtax on all individual income over $2 million. In
the current economy, all super incomes - not just banker bonuses -
represent windfall profits made possible by the sacrifices working
Americans have made to stabilize the nation's financial system.
3. A limit on the executive pay that all U.S. corporations and banks can deduct off their taxes. The
original bailout legislation limited the deductibility of executive
compensation at TARP recipient firms to no more than $500,000. That
step needs to be extended throughout the economy, as the Income Equity
Act now pending in Congress proposes.
European
nations have so far taken tougher action against the banker bonus
bonanza than the United States, notes Chuck Collins, the director of
the IPS Program on Inequality and the Common Good. But U.S. financial
executives would likely find ways to circumvent the various European
proposals - most notably a 50 percent tax, payable by banks, on big
bonus payouts and required deferrals of as much as 60 percent of bonus
outlays for three years.
"The deferrals give banks an incentive to shift dollars from bonus to
salary," notes Collins, "and the big banks are 'spreading the pain' of
the tax across their operations - and also threatening to tie up the
banker bonus tax in the courts."
"If the United States were to impose an emergency 50 percent surtax on
all income over $2 million," adds IPS associate fellow Sam Pizzigati,
"America's wealthiest would still be paying taxes at a lower overall
effective rate than they paid during the Eisenhower years."
Contacts:
Kristi Ceccarossi, Communications Associate, Kristi@ips-dc.org, (617) 983-4094.
Sarah Anderson
is the Director of the Global Economy Project at the Institute for
Policy Studies and a co-author of 16 IPS annual reports on executive
compensation. Contact: sarah@ips-dc.org, 202 234 9382 x 227.
Chuck Collins
is a senior scholar at the Institute for Policy Studies where he
directs the Program on Inequality and the Common Good. Contact: chuckcollins7@mac.com, 617 308 4433.
Sam Pizzigati is an Associate Fellow of the Institute for Policy Studies and author of the online newsletter Too Much. Contact: editor@toomuchonline.org, 301 933 2710.
John Cavanagh is IPS Director. Contact: jcavanagh@igc.org, 202 234 9382 x 224.
Institute for Policy Studies turns Ideas into Action for Peace, Justice and the Environment. We strengthen social movements with independent research, visionary thinking, and links to the grassroots, scholars and elected officials. I.F. Stone once called IPS "the think tank for the rest of us." Since 1963, we have empowered people to build healthy and democratic societies in communities, the US, and the world. Click here to learn more, or read the latest below.
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