Already there’s confusion over what the 90 percent bonus tax bill passed by the House really means. Targeted at the AIG bonuses, which sparked bi-partisan demagogism, the bill would really apply to all firms that received more than $5 billion from the Troubled Asset Relief Program (TARP). Here’s what the text of the bill states:
· (1) IN GENERAL- The term `TARP bonus’ means, with respect to any individual for any taxable year, the lesser of–
(A) the aggregate disqualified bonus payments received from covered TARP recipients during such taxable year, or
(B) the excess of–
(i) the adjusted gross income of the taxpayer for such taxable year, over
(ii) $250,000 ($125,000 in the case of a married individual filing a separate return).
If the “TARP bonus” bill the House passed today becomes law, any of the hundreds of thousands of people who work for Citigroup, Bank of America, AIG, and nine other major US corporations will have to fork over 90 cents of every dollar they make that puts their household income over $250,000.
That’s household income, not individual income.* If you’re married and filing singly, you’ll have to surrender anything over $125,000. Indefinitely.
It does seem to mean that if somebody is making $125,000 or a couple filing jointly making $250,000 gets a bonus, the amount above that income level gets taxed at the confiscatory rate.
It’s not likely that those thousands of employees around the country will be happy with this confiscatory taxation. There’s been lots of talk in recent months about “going Galt,”but so far it hasn’t really caught on at the big firms. Caroline Baum at Bloomberg thinks the time may be ripe for that to happen, and this was written before the 90 percent tax vote.
Somewhere John Galt is smiling.
The hero of Ayn Rand’s “Atlas Shrugged” is smiling because he’s seen it all before: the government’s intervention in the private sector; the constraints placed on business in the name of the people; the desperation on the part of government bureaucrats when they realize their leverage is limited; and — this part is still fiction — the decision on the part of business leaders to walk away from the enterprises they built.
Wonder how AIG head Edward Liddy feels after his contemptible treatment by lawmakers this week. And this is the guy who took over the firm in September 2008 and pays himself $1 in salary. He should have been praised for taking on this almost-impossible job. But no, legislators were too busy posturing for the cameras and venting their outrage. But he would be a hero if he “goes Galt.”