By J. Taylor Rushing - 02/04/10 05:18 PM EST
Sens. Barbara Boxer (D-Calif.) and Jim Webb (D-Va.) unveiled a bill Thursday to tax extravagant bonuses paid out by financial firms that have benefited from taxpayer assistance.
The Taxpayer Fairness Act would apply only to Wall Street firms and banks that received at least $5 billion from the 2008 Troubled Asset Relief Program (TARP). Specifically, it would impose a 50 percent excise tax on any 2009 bonuses paid to employees at those firms that received a salary greater than $400,000. The tax would apply to the portion of the bonus that exceeds that figure — which Boxer and Webb picked because it matches President Barack Obama’s salary. Employees’ base pay would be unaffected.
Boxer estimated that up to $10 billion could be generated from the bill, which would be dedicated to reducing the federal deficit. She emphasized that TARP assistance was only a portion of the assistance that the major financial firms received, along with asset guarantees and low-interest loans.
The bill’s future is uncertain. Boxer said she had not run the bill by the White House but hoped to attract co-sponsors soon, and Webb said he was hopeful but unsure of GOP support. He noted, however, that the “inspiration” for the bill came from an editorial he saw in the Financial Times last year.
Boxer unveiled statistics that showed the seven major TARP recepient firms received $31 billion in total bonuses, with 4,675 employees receiving bonuses exceeding $1 million. Bonuses paid this year are expected to be even larger — total compensation at the same seven firms has jumped by $14 billion this year, with much of the amount going toward bonuses.
According to Boxer and Webb, there are 13 firms that would fall under their proposed tax because they received at least $5 billion in TARP money: American International Group (AIG), Bank of America, Citigroup, Fannie Mae, Freddie Mac, General Motors, GMAC, Goldman Sachs, JP Morgan, Morgan Stanley, PNC Financial, Wells Fargo and U.S. Bancorp.
Webb took pains to emphasize that the bill does not represent any attempt at “class warfare.”
“When we were on the verge of an economic calamity, we had to put $700 billion in taxes on people out there who were doing regular jobs,” he said. “Somewhere out there there’s a nurse working in a hospital, there’s a Marine serving in Afghanistan, there’s a guy driving a truck, and they had to dig into their pockets and pay the taxes to bail out these companies.
“And all we’re saying is, on a one-shot deal, in the year these monies were recuperated, for bonuses over $400,000 — in addition to the regular compensation — they should share the benefit of that bonus with the taxpayers who bailed them out.”