A month ago, Sen. Jim Webb and Sen. Barbara Boxer introduced the Taxpayer Fairness Act, S 2994. The legislation would levy a one-time 50% tax on bonuses over $400,000 paid to executives of financial institutions that received $5 billion or more of taxpayer support under the Troubled Assets Relief Program (TARP). The legislation would affect an unknown number of executives at 13 financial institutions and raise up to $10 billion that would be applied against the federal deficit.
"It’s outrageous that many of these companies are doling out millions of dollars in bonuses while the rest of America feels the pain of reckless decisions," said Boxer on Feb. 4.
Webb wanted to add the tax proposal to the jobs bill last week, but no amendments were permitted. So now he hopes to attach it to the "tax extenders bill," H.R. 4213, which has now been resolved after getting the haggle treatment by Sen. Jim Bunning and the Democratic Senate leadership.
Unsurprisingly, numerous critics have whined about the Webb-Boxer proposal, even though it focuses only on those few banks that received monster taxpayer bailouts and is far less onerous than a House bill passed a year ago that would have imposed a 90% retroactive tax on bonuses of $250,000 or more. The House legislation never made it to the Senate. Webb-Boxer also doesn't go as far as a 50% tax on banker bonuses over $40,700 levied in Britain late last year. Nor as far as Sen. Sherrod Brown's proposal that would impose a 50% tax on bonuses of over $25,000 for executives working at any TARP recipients, not just the biggest 13.
Webb called the tax "a matter of basic fairness to the American taxpayers who enabled these financial institutions to again become profitable." And they became profitable without doing much of what the bail-out was meant to do, accelerate lending to small businesses and homeowners. "This money went other places," Webb said. "So if they want to take this money and put it into fairly extravagant bonuses, then they ought to pay some back so we can reward the taxpayer. In other words, if you are going to get that kind of bonus, you can share it 50-50 with the people who helped bail you out. We believe it is fair and reasonable."
Brown made similar comments last month about his proposal: ""Most of these banks are healthy again, but the rest of the economy’s not. These banks are healthy because the taxpayers stepped up and assisted them. ... This country has made Wall Street rich. Wall Street has not, in the last decade, returned the favor, frankly, and this bill will help them do that."
You can taste the acid when foes of such modest payback proposals pronounce them the unfair products of populist outrage or that all-purpose put-down of "class warfare." They conveniently paper over the fact that it isn't middle-class and working-class initiatives that have suppressed wages and transferred wealth upward over the past three decades. But, in their view, it's only class warfare when we resist.
Given the record of previous efforts to rein in outrageous bonuses at companies that might not even exist without taxpayer handouts, the chances that Webb-Boxer's or Brown's proposals will pass are about as good as the chances that we'll see a decent bank regulatory bill reach the President's desk. But it's always worth calling your Senators to nudge them.