In the 70s, in Sweden, it was possible to pay more than 100% tax i.e. a raise would net less. The 90% TARP relief bonus tax tax would end up being over 100% for New York City residents (although half is shouldered by the company rather than the individual).
Here’s what AIG have to say about it:
To those who say it’s okay because taxpayers effectively own AIG, Gleckman said: “Do we really want Congress to micromanage the business practices of this firm? That’s the quickest way I know to drive the value of the company’s remaining assets to zero and guarantee taxpayers will get no return on their investment.”
Wrong.
1. No we don’t want the government to micromanage business practices, which is why the 90% tax will encourage companies like Goldman return TARP funds to avoid government micromanagement.
2. The quickest way to drive the value of a company like AIG’s assets to zero would be to have let it go bankrupt and not had any government intervention.
I suspect the 90% tax levy may not help bribe people to unwind things, where necessary. A better approach would be actively going after fraud.
Paul Krugman says:
“It’s not the way you should make policy — it’s clumsy, and it will punish some innocent parties while letting the most guilty off scot-free.”
But it is what it is and if it passes a senate vote, it shows that the US is capable of acting quickly, whereas the UK with its inaction over RBS looks spineless.
I agree with you, David. Thanks for the post!