A general rule of thumb in business news: the words "Wall Street" and "bonuses," when mixed, make for an explosive story.
Today is no exception. The New York Times is reporting that Wall Street firms are weighing the possibility of paying out their 2010 bonuses this month instead of next year out of concern that Congress won't extend the Bush-era tax cuts for the nation's highest earners--despite the fact that lawmakers appear on the verge of a deal that would extend the tax cuts for all income levels.
As the Times explains, a typical worker who earns a $1 million bonus would shell out $40,000 to $50,000 more in taxes next year than this year if tax cuts aren't maintained for those making more than $250,000. In one of the best years ever for bank pay, compensation consultants are working with firms not just regarding taxes, but also to avoid inciting a public outcry over payouts by, for example, diverting some money from bonuses to "long-term incentives."
These strategies don't appear to be working on commentators, many of whom are furious. But others are urging moderation:
- Wall Street Is The Most Self-Centered Industry, complains AMERICAblog's Chris in Paris: "Let the industry go under the next time there's a crisis ... Every move is about protecting their lifestyle at the expense of others. What's worse is that Congress and the White House remains too afraid to call them out. This is class warfare against the middle class and poor but that's what happens when we get stuck with a Wall Street government."
- How About Wall Street Gives The Money It Saves to the Unemployed? suggests the Atlanta Journal-Constitution's Jay Bookman: "Those additional taxes saved by that 'typical worker' would cover unemployment benefits for a year for three Americans left jobless in the wake of the fiscal crisis, a crisis created in large part because of Wall Street greed and carelessness, a crisis eased considerably because the U.S. taxpayer and the Federal Reserve lent Wall Street firms hundreds of billions of dollars at considerable risk."
- Not So Fast--Banks Won't Pay Bonuses Early If Goldman Sachs Doesn't, explains Dealbreaker's Bess Levin: "Goldman itself has not yet decided anything and it would be a bit crunched for time on coming up with the numbers if it did in fact decide to accelerate the bonus timetable, to say nothing of the fact that [the Times] reported on the same day that it’s looking like the tax cuts will be extended" for everyone.
- And Banks Aren't Acting Unfairly or Only Benefiting Themselves, states The Atlantic's Daniel Indiviglio: "The bonuses in question were earned during 2010. Is it fair that this aspect of compensation be taxed at a new rate for 2011?" Indiviglio estimates that if firms speed up their payouts, it would cost the government $414 million. But, he points out, bankers will either spend that money, boosting Manhattan's economy, or invest it, which should raise asset prices and stimulate the larger economy. Indiviglio, like Bess Levin, adds that the debate is probably moot since Congress is likely to maintain all tax cuts.