http://krugman.blogs.nytimes.com/2009/12/09/darling-i-love-you/Darling, I love you
OK, that’s way too strong. But Alistair Darling’s new super-tax on bank bonuses sounds like a good idea, on first read. Or as Justin Fox puts it, why the heck not?
Are we afraid that the best and the brightest will leave high finance and pursue other occupations? That strikes me as a good thing: everything we know suggests that the rapid growth in finance since 1980 has largely been a matter of rent-seeking, rather than true productivity. (As Paul Volcker says, it’s hard to come up with any clearly productive financial innovations of recent decades other than the ATM).
Or are we worried that it’s just unfair to discriminate against high-earning bankers? Bear with me while I stop laughing. More seriously, the whole sector has just been bailed out at immense taxpayer expense. Some payback seems entirely reasonable.
So, the details need analyzing. But on the face of it this looks entirely reasonable.
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Bankers' bonuses hit with 50% super-tax in PBR
• Chancellor announces bonus tax will be introduced immediately
• Bank payroll tax will raise only £550m
A new "super-tax" on bank bonuses will be introduced immediately, the chancellor announced today, in an attempt to stop banks using profits to pay large bonuses to bankers.
Alistair Darling attempted to appease critics who feared the tax on bonuses would prompt defections from the City by insisting the 50% tax rate on bonuses of more than £25,000 would be paid by the banks rather than employees.
The one-off "bank payroll tax" will only raise £550m and is perceived as a fresh attack on the City following the bank bailouts last year, which the National Audit Office has calculated are costing £850bn.
The charge will cover bonuses awarded between 9 December 2009 and 5 April next year.
Darling said: "There are some banks who still believe their priority is to pay substantial bonuses to some already highly paid staff." He added: "Their priority should be to rebuild their financial strength and increase their lending. So I am giving them a choice. They can use their profits to build up their capital base. But if they insist on paying substantial rewards, I am determined to claw money back for the taxpayer."
He said he expected banks to show bonus restraint after incurring combined losses of £80bn in 2008 and insisted government tax polices were based on "fairness and responsibility".
more...
http://www.guardian.co.uk/business/2009/dec/09/bank-bonus-super-tax
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