Congressman Proposes 50% Tax on Wall Street Bonuses
Rep. Peter Welch (D-VT) introduced legislation this week to levy new taxes on yearly employee bonuses at financial institutions receiving assistance from the Troubled Asset Relief Program (TARP). Under the bill, bonuses above $50,000 in either cash or stock would be taxed at a rate of 50%. Under the Wall Street Bonus Tax Act, H.R. 4426, which Welch announced at a press conference this week at the Burlington International Airport in his home state, all proceeds from the bonus tax would fund a new direct-lending program administered by the Small Business Administration (SBA). The program would offer low-interest, government loans to healthy businesses having trouble finding lines of credit for expenses and expansion. According to the New York Times, Goldman Sachs (GS) is expected to pay employees an average of $595,000 for 2009. Those at JPMorgan Chase (JPM) could collect $463,000 on average, although the report isn't clear if that compensation is in salary plus bonuses, or bonuses alone. The bill follows actions in other Western economies, notably in the UK, to heavily tax bonuses. The 50% tax on bonuses above £25,000 ($40,668) in the UK should generate more than £2bn in revenue, though investment banks there say it will greatly undermine their ability to stay competitive by drawing in the most talented employees with the prospect of unburdened financial incentives. Nonetheless, Welch believes that large bonuses from bailed-out Wall Street firms to their employees would highlight the potential inequities against what the stimulus is trying to accomplish: “Fifteen months after the American taxpayer threw Wall Street a life preserver, its biggest firms are about to break their own records of lavish, excessive and unearned bonuses. Paid for by hardworking Americans who continue to struggle through tough economic times, these bonuses are Exhibit A that Wall Street has not learned its lesson,” said Rep. Peter Welch. “When you see a bank being robbed, you try to stop it. My bill will put an end to this breathtaking heist.” Write to Jon Prior.