Britain is going to impose a 50% tax on banker bonuses--should the U.S. do the same? The tax, announced by British Chancellor of the Exchequer Alistair Darling, is a one-time deal. With end-of-year bonuses looming on Wall Street as well, many American populists are eyeing the measure from Her Majesty's government with envy. It could raise revenue, punish banker "greed," and extract a fee for the sector's reliance on taxpayer largess to get firms back on their feet. But is a one-time "supertax" even a good idea, and could it work in the States?
The wealthy have limited resources, even if it does not appear that way to the middle class or Congress. A 2% tax on people who make over $500,000 a year to cover healthcare and another 2% to help pay for jobs programs may be enough to keep a well-to-do person from spending much at Christmas. Retailers lose customers and states lose sales tax revenue.
- Take Note, Obama The New Yorker's John Cassidy thinks the Obama administration would do well to attempt an American tax: "As of now, both [Tim Geithner and Larry Summers] are widely regarded as shills for Wall Street."
- Not the Cure for Banker Greed The Guardian's Zoe Williams isn't convinced the tax is the best idea for Britain or America. The "morality," of the bonus culture, she writes "is too mercurial to get your shoulder behind," and politicians should focus "on the practicalities. How to insulate the many against the few? How to stop bankers leaching money that isn't there? How to stop them risking money that isn't theirs? Sure, tax them, for a laugh; but all these answers lie in regulation, not tax."
- U.S. Unlikely to Adopt, May Benefit from British Brain Drain The Atlantic's Daniel Indiviglio doesn't think the U.S. is likely to copy the British anytime soon: "This measure is just too extreme to fly in the U.S. Besides, you'd see a lot of politicians lose quite a few political contributions if they took this kind of punitive action against all of Wall Street." It's quite possible instead, Indiviglio argues, that New York City will benefit from the London brain drain following the British move: "Even though the British government claims that this tax is a one-time event, bankers there will not soon forget when the government cut their bonuses by 50%. After all, if the government did this once, it could do it again."
- What British Brain Drain? Reuters's Felix Salmon points to "the genius of a one-off, nationwide supertax: while any individual banker might be able to move overseas, they can't all do that en masse." Plus, "moving overseas doesn't alter the tax status of this year's bonus," and it's likely next year's government will be run by the more business-friendly Conservative party. "So there won't be any exodus here." Salmon wouldn't like to see "one-off" taxes becoming a habit, but he's pretty happy about this particular one.
- Use British Brain Drain to Level American Tax The New Republic's Noam Scheiber points out that Britain having taxed first "makes it more attractive in this country. There are, after all, only so many global financial centers out there," and American bankers wouldn't be heading to London to escape an American tax. Scheiber also picks up on Salmon's one qualification, and expands: "the downside ... is that leveling one-off, mostly-retroactive, semi-confiscatory taxes at politically unpopular groups isn't something you'd want to become a fixture of the government's tool kit."
- 'Darling, I Love You' New York Times populist-trending economist Paul Krugman is, if possible, even more enthusiastic about the British bonus tax than Felix Salmon. "Are we afraid that the best and the brightest will leave high finance and pursue other occupations? That strikes me as a good thing ... Or are we worried that it's just unfair to discriminate against high-earning bankers? Bear with me while I stop laughing."