President Obama, Vice-President Biden and Tax Cheat Treasury Secretary Geithner bashing Wall Stret Execs for taking in aggregate some $18 billion in bonuses in 2008, or rather, for fiddling whole Rome burnt.
I don’t like it, either, because it doesn’t pass the smell test. But for people associated with government to be mad is a little hypocritical, because those bonuses are also income to the execs that get it, and are thus subject to Federal and New York State income taxes. Since they already made a lot of money, surely those bonuses were subject to the highest marginal income tax rate for both the Feds and the state. Also New York City has an come tax.
A few days ago, Rush had a story that the marginal decrease in these bonuses from 2007 to 2008 means that the treasuries of the state and the city are missing the revenue based on smaller bonuses. It was something like $1 billion for the state and $270 million for the city.
Even if these firms would not have paid these bonuses, the tax effect would have been a cat’s game, because the top marginal rate for corporations is the same as it is for individuals, 35%. If they would have kept enough employees on the payroll commensurate with those bonuses, (i.e. kept $18 bn worth of employees rather than taking the bonuses), the governments would have lost out because all of those salaries would be taxed at lower rates, because each individual is making less than the income for the top marginal tax rates, plus they can take certain deductions and child credits that high income earners cannot.