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Britain To Tax Banker Bonuses At 50%, Will US Bankers Now Drop Market Preemptively To Show Who Is In Charge?
In his pre-budget report, British Chancellor Alistair Darling said that he will now levy a 50% tax on banker bonuses. The new tax will be effective from today until April 5.The tax will hit virtually all financial companies, including subsidiaries of foreign banks . Thus a Goldman banker working in London will suddenly be faced with a much higher marginal tax rate that his associate in New York. This will either generate much transatlantic resentment, or expect a comparable move to the replicated by the IRS with the President's blessing, who has already lost control of the unemployment picture, so the last thing he can do to regain some popularity is to take Main Street's outcry direct to the southern tip of Manhattan.
“We hope it will be a disincentive for banks to pay bonuses,” said one Treasury official.
The
windfall tax – which politicians argue is justified, as banks have
generated excess profits as a direct, or indirect, result of the
bail-out of the banking system – will apply to all banks and building
societies, including groups that operate in the UK under a European
Union branch system.
The banker response did not come as a surprise:
Bankers reacted with shock to the measure. “This is extreme
victimisation,” said one senior investment banker. “A lot of people
have been working their tails off, never seeing their families to try
and fix the problems of the past and now they are being discriminated
against. It just makes me want to quit the job.”
Didn't the AIG General Counsel say the same thing? Alas, the same gambit did not work out too well for her.
The government is convinced that banks are unlikely to consider
shifting headquarters away from the UK as a result of a one-year tax of
this kind. But there is a widespread expectation in the City that the
windfall tax will prompt London-based bankers to ask for their
contracts to amended to attach them to other financial centres, such as
Zurich, Paris and Frankfurt.“It is completely naïve to think
this will have no effect,” said one banker. “The Treasury, the FSA, the
Inland Revenue and politicians are all being very aggressive across the
board. The UK is making itself business unfriendly. A huge number of
colleagues will get themselves relocated.”
Yet even as the likelihood of a copycat tax in the U.S. is increasing, the question is do the domestic trading desks now drop the market and show the administration who is really in charge? Because even the President's working group can not survive a concerted attack from every single financial entity in the world. And bankers are nothing if not efficient at marking their territory in the protection of take home pay. If that requires a 200 point drop in the S&P, so be it.
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It's paid for by the employer, not the employees, get your facts straight
Correct, but they are going to simply downsize the bonus pool accordingly. If they do that at least those responsible will pay. If they pay the current bonus pool and then the tax, then shareholders are gonna get stiffed. You win some you lose some!
Will they accept credit default swaps as payment? Whatever the case, moral hazard solved. These honest folk will definitely not try to evade such a tax or do anything more mischievous to make up for the lost moolah.
maybe they can pay them in carbon credits
Who is REALLY in charge is the people and it is fast approaching the time when the people will need to demonstrate that fact to both bankers and the governments: by stringing bankers by their subhuman necks from lampposts as far as the eye can see.
They want to fight the fair and correct separating their ill-gotten monies from themselves? OK, then we will separate them from their money by another means. The dead don't need money.
`lampposts`.... Beware of The Dictator, the one.
why not just pay bonuses april 6th?
is there something here i dont see?
April 5 is the close of the UK tax year and thus the measures fall into the next tax year.
I definitely look for some bonus tax posturing ahead of the mid terms. Any tax will just be temporary with sufficient loopholes, and it will be business as usual after the elections.
If that ILLEGAL PRESIDENT actually had a pair, he would have sent a message to all parties that ANY coordinated manipulation of the markets would have Federal Marshals rounding up ALL heads of EVERY financial institution, the likes of that POS Jamie Dimon!
Hey Messiah 2.0, why don't you borrow a pair from Tiger Woods, assuming that they are not too compromised from excessive use.
wow...impressive vitriol. good to see zero hedge attracting redneck birthers.
Shut your pie hole chickenboy. Personal attacks are not welcome here.
my pie hole? thank you for reminding me what is welcome, anonymous.
+1000
Apparently we just became Yahoo Finance.
Why is the tax rate so low?
+10, LOL!
Intelligent question indeed.
Bankers reacted with shock to the measure. “This is extreme victimisation,” said one senior investment banker. “A lot of people have been working their tails off, never seeing their families to try and fix the problems of the past and now they are being discriminated against. It just makes me want to quit the job.”
See it's not just a bummer. It's EXTREME VICTIMIZATION. I mean we can run a global banking system anywhere. We don't have to be stuck on this shit hole planet. We're moving to uranus where they know how to be nice to us.
I like the "quit this job" part. Mission _almost_ accomplished.
Everyone should do their part to send these banksters to Uranus.
Quit picking on the bankers or they will have to give themselves therapeutic bonuses!!! Just let them gently self medicate through this entire crisis while we starve. It's the least we can do for them for all their faithful civil service.
if a 200-point (or 2000-point) drop in the s&p results from a copycat u.s. measure, i say go for it. double positive. something has to correct this thing, and if it's a punitive, targeted tax on our "best and brightest", well then so be it.
also, it's the right thing to do
Obama in 3 years:
http://www.youtube.com/watch?v=_Q-6H4xOUrs
IF the Obama administration had any ballz, and wanted to show the American people some RESPECT, they would tax the ill-gotten gains of the Wall Street oligarchy by 75%!!!!
No more jacking around---Their greed caused the problem, their pain can fix it.
What we see now is a direct result of the government removing all consequence for their banking buddies, who are the real rulers of this nation!
STOP THE OLIGARCHY!!!!!
Please stop and think for a second. Don't give anymore money to the gov't, just put in place legislation that says something like, "no executive or board member can receive more than X:1 ratio of salary than the average salary of the company. Any excess profits must then be used, pay down debt, to buy back stock or dividend out to shareholders." NO GOV'T. KEEP MONEY IN PRIVATE SECTOR. just need to figure out what X:1 should be.....
With marginal income tax being raised to 50% - which alone has sent many HFs and PE shops to Switzerland, this will defintely close down mayfair and St James and be good news for Rue du Rhone.
Want to quit your job, Bankers?? Fucking QUIT, we beg you!!!
This tax will be levied on the employer, not the employee. The employee will also pay tax as usual. As I see it, it means the UK Treasury will receive a total amount equal to the notional bonus...
"the windfall tax will prompt London-based bankers to ask for their contracts to amended to attach them to other financial centres, such as Zurich, Paris and Frankfurt."
See the HFT chasing Rosetta Stone as thousands of bankers start learning French and German.
UK Chancellor Alistair Darlings says that British bankers 'should be able to look at your next door neighbour and justify what you are doing'.
One banker told Here Is The City: 'I don't see my next door neighbour. He's a Member of Parliament who pretends to live there just to claim extra expenses
And that is when you know that your government has reached 100% corruption. Goodbye Britain!
UK Chancellor Alistair Darlings says that British bankers 'should be able to look at your next door neighbour and justify what you are doing'.
One banker told Here Is The City: 'I don't see my next door neighbour. He's a Member of Parliament who pretends to live there just to claim extra expenses
Ah politics. That idiot PM Brown and his fartcatcher toady Darling are doing a fine job of running the UK into the ground. Sure, it is a no-brainer for a politician to whack a bunch of banks with some taxes...nothing like little dick syndrome "look at me I am tough" medicine from a party months away from an inglorious election defeat.
Yes, it is hard to feel sympathy for the city boys...it should have come as no surprise to them that they were like deer in headlights for the demagogues in political power. But go ahead Britian, nail the one industry that provides any kind of international prestige to your cute little island...I am sure the view of the Alps is wonderful this time of year.
But go ahead Britian, nail the one industry that provides any kind of international prestige to your cute little island
Are you serious? When the U.K. government just put its taxpayers on the hook for guarantees on $273 billion in dodgy assets of the Royal Bank of Scotland, an amount that is over 10% of U.K. GDP for ONE BANK that has already had enormous cash injections from taxpayers, that's pretty expensive "prestige".
The banksters should shut up and be thankful their bonuses aren't being taxed at 100%. They are highly paid welfare queens. Without taxpayer bailouts there would be no bonuses or salaries.
+10
The banksters should be thankful for their continuing freedom and any income.
Quite serious. It is all too easy for attention craving politicians like the gnomish Brown to slap around a bunch of bankers. I bet it gives him a pop in the polls, but at what cost long term? I don't deny that the bankers had lots to do with our enjoyable little financial crisis, but come on, they were aided and abetted by the slimy scum like Gordon Brown. When is his turn at the dock?
Go ahead and chase away the bankers like witches but I am only saying that in a few years when this crisis has abatted, the financial industry will be considerably smaller (maybe a good thing you say) but what will take its place as an economic force and job creator?
Windmills?
we could put people to work building physical castles made of sand... i'd say it's right up your alley... except that it isn't.
Canada has a heavily regulated, boring banking system that never allowed much of this stupidity. Canada has suffered relatively little in the financial crisis and is currently one of the economically healthiest nations in the world. What, again, do we owe the banksters?
Canada is irrelevant to this discussion. My point is the UK is an economic basket case and needs all the economic activity it can handle to get back on its feet. Raising taxes on a highly mobile industry is not, in my humble (and Canadian) opinion, nuts.
Yes, the UK is a basket case. Salvation might be found in dismantling the welfare system, the Orwellian police state, and halting any further immigration into the UK. After that they could start once again actually making and exporting useful products. (The US would do well to follow these same recommendations.) Unfortunately the UK seems to have had the world's largest attack of the stupids. I do not think that the bankster industry contributes lasting and net positive value to the UK.
Actually "make" something? What a quaint idea! If only James Dyson could be cloned a few hundred times.
delete dupe
Just when you thought the game couldn't get any more interesting
Sweet! If US Bankers try to drop the market preemptively the Reston 6 will be called into action. Timmy is still a public servant and must comply.
75% tax on US Banker Bonuses!!
The bonus babies should be allowed their full bonuses, except it must be paid with toxic assets as valued in the accounting books of the company. This would get these toxic assets off the book of the company, and appropriately give the bonus babies their just rewards.
Great idea. Let's be sure they get taxed at 50% of the value that those assets are held on their books at, also.
No, it should not be taxed at all.
Let them be paid both bonuses and salary with the garbage they peddled to the rest of the world, instead of cash.
Then they can sink with said garbage to the bottom of the east river, or in bankruptcy.
Whichever.
I think you're missing it. You distribute a bunch of worthless assets but value them, for income tax purposes, at their carrying value. Then you require payment of taxes, in cash, based on that distribution valued at the fictitious carrying value. It's an elegant punishment.
To cut those taxes, the bonus bables would have to quickly sell off those assets (good luck finding a buyer) so they can declare tax losses against the income gain. In the US that would allow them $3000 in capital losses per year, which still sticks them with a large tax bill for the bonus.
“A lot of people have been working their tails off, never seeing their families to try and fix the problems of the past ..."
And the problems were caused by??
Let them have the bonuses. Then end all stimulus activity that they benefit from. The banks are still mostly in really bad shape so they'd have their bonus but have to clean out their desk like millions of other Americans.
Be careful, if you piss off the priesthood, they will be forced to sell indulgences somewhere else. End of world coming if all the top indulgence sales are concentrated in one lucky country.
Aguy went to a butcher asking about the price of a pound of meat. The butcher says "its free". The guy asks"can you weight it for me?". I think it is all posturing. The bankers got their bonuses for free. They buy the equities or bonds at prices they know they wont lose at. they got the timing of the ralley courtesy of the FED and GS. And they got the free bailout. So basically,they got their bonuses for free,and now they are asking the goverment to weight for them. But believe me,Mr. Allstair Darling took thier permission before he introduced that law. I am quite surpried to see a debate about that here,with mostly well informed people. You have to understand that anything has to do with bankers,has to have their green light before introduction. And the give and take between them and the goverment,is pure posturing for the general public,to make believe that they have no say into goverment decissions.
in the netherlands we have the 50% on bonus for ages....
Jump, you f*ckers
Tax the crooks at 99%
The "retain talent" argument is such blatant bullshit. The banksters must have to try hard to keep from laughing when they trot that one out.
For everyone who cheers this, remember that bank employees who are making $30k-$100k per year also receive bonuses. This includes auditors, accountants, trust operators and many others. Plus, bonuses in the U.S. are already taxed at a rate around 35%.
Targeted bonus taxes on the higher earners would be more sensible; the lower-middle class does not deserve to get hurt even more in order to pay for the sins of both the top and bottom of society.
only applies to bonuses over about $42,000 USD I believe.
Any way even the lower earners are not "entitled" to a bonus that is paid for by taxpayers... the bonuses they made over the past decade were fake, based on a ponzi scheme. You can't say that they are entitled to keep their fake bonuses once the ponzi scheme collapses, just because they've gotten used to that artificially high level of pay.
If you are a low-level employee who works for a bank that gambled itself insolvent, I fell bad for you but hey if you still have a job at all, it's thanks to the taxpayers. If you think you can do better, don't let the door hit you on the way out.
You're right, I hadn't looked at the article for the 42k limit. My fault. Let's hope that's where the limit stays.
Also, if you're talking about the TARP banks(as far as U.S. implications), I could agree with you. I worry about the danger of a "general bank bonus tax" being pushed here. Banks which did not take TARP should not be affected by any sort of bonus limit/tax.
Also, if a bank has repaid TARP with interest, then there needs to be a different scale for them. Government-guaranteed bond offerings should also be factored into this issue.
My main point is that we need to watch the government just as closely as we do the banks. Best case scenario: cut govt. spending while taxing big bonuses.
So it is a 50% tax only levied on bonuses above £25000. They still walk away with a minimum bonus in excess of £10000 (or more likely multiple thereof) and have reason to complain. Average annual wage in the UK is around £25000 and the bankers wonder why people are unhappy. Some people in the banking world need to get a grip on the new reality...
Actually the most interesting fact that Darling only expects to gather 550 mio - that does not make any sense since alone Goldman London should have a pool of 1 bil GBP. Its only for discretionary bonus not contractual and I guess the overall bonus pool for 1 mio city people can not be 1.1 bil after the freshold of 25k. It should be around 20 bil at least so why only 550 mio in tax income? That's a bullshiting story anyway - just some propaganda.
90% tax on any bonus paid by all TARP, TLGP, etc. recipients, regardless whether they have paid the TARP money back...when they decide to become investment banks they can pay the bonuses without the extra tax. Alternative: take stock options that will not vest for at least 5 years, and which may never have the strike price reduced.
Who cares how much the bankers get paid. They are apparently to dumb to manage systemic risk as demonstrated in 2008.
50% woopie. Here's a look at the history of the top income tax bracket in the U.S. Surely most of these bonuses would fall into these tax brackets throughout history. Our current income tax system is an underlying cause of this banker free-for-all.
1913-1915 7%
1916 15%
1917 67%
1918 77%
1919-1920 73%
1921 73%
1922 56%
1923 56%
1924 46%
1925-1928 25%
1929 24%
1930-1931 25%
1932-1933 63%
1934-1935 63%
1936-1939 79%
1940 81.1%
1941 81%
1942-1943 88%
1944-1945 94%
1946-1947 86.45%
1948-1949 82.13%
1950 84.36%
1951 91%
1952-1953 92%
1954-1963 91%
1964 77%
1965-1967 70%
1968 75.25%
1969 77%
1970 71.75%
1971-1981 70%
1982-1986 50%
1987 38.5%
1988-1990 28%
1991-1992 31%
1993-2000 39.6%
2001 39.1%
2002 38.6%
2003-2009 35%
Anyone who earns 10 million dollars in one year and goes back to work again the next year should be considered to be psychotic and unfit for any job with decision making responsibilities. Jogging suits are much more comfortable then monkey suits.
Somebody please let me know....when the US copycat is
going to happen....
Say ....why not 100% tax ?....that's the secret tax to savers....
Savers get 0% interest....tax free ....which is just another way of taxing savers 100%....
Please one of the savy here ...let me know...
I want to Sell Short ...BEFORE the copy cat announcement....
Somebody please let me know....when the US copycat is
going to happen....
Say ....why not 100% tax ?....that's the secret tax to savers....
Savers get 0% interest....tax free ....which is just another way of taxing savers 100%....
Please one of the savy here ...let me know...
I want to Sell Short ...BEFORE the copy cat announcement....
The Chancellor can just make a decree like that?
Really?
That banker has guts threatening to quit- who would hire him?
I hired an ex-banker once- as a DISHWASHER. Never again.
First day of work he shows up with a little lapdog named "Fedo".
I said "whatever, but what kind of name is Fedo, you mean Fido, right?"
"No", he says,"it's FED-O".
Didn't work out.
Guy didn't do any work.
He had Fedo lick all the plates clean.
He tells me they're clean.
They looked clean.
But they were really just covered in drool and toxic.
...
[That's all I got, thanks ZH for all the material.]
Make it 500 points on the S&P while you are at it, anyway it would be perfectly timed to trigger the next leg down in the markets. At least we can then blame the brits for it and I can stop sweeping the floor for a living :o