90% bonus tax questions

[jkm, the stolen pifwafwi]

this knee jerk law seems jacked up to me.

1st, bonuses are considered "ordinary income" by IRS standards. they just have special handling when paid out as you have to deduct payroll taxes at the highest marginal rate. how do they differentiate "bonus" income from "regular" income?

2nd, what if a retiree takes early retirement with a balloon payment from the auto industry? it could easily spike his income over $250k for one year. does that get taxed at 90% even though the tax might take him back down to $90k?

3rd, what if you make $250k from other sources than your work and most of your income from work is bonus related? for example, you make 250k from your trust fund and make 15k with a 45k bonus? do they tax the 45k at 90%?

[OUHOMER]

I was pissed about AIG giving out bonuses still am, but I think this is bull**** too. Its a done deal let it go and move on I guess, but rewrite the bonus program to where it reflects positive growth etc.

[Chuck Bao]

I really don't think the IRS can start separating bonuses from base salary and taxing bonuses at a higher rate. My company has the policy of paying low salaries with the bonus being performance based, even with back office staff.

I'm not an accountant and I don't know the answers to your questions. But, if there is a big redunancy package, could you get the employer to delay payment until the next year? I know with year-end layoffs (and I always thought that it was heartless to lay off people right before Christmas), they would delay the redunancy payment until the new year. Okay, you mentioned the auto sector. Forget that. Who knows what financial shape they'll be in six months from now?

I have my own questions. For me, it is not only the redunancy package but also the provident fund. Once an employee leaves a company, the provident fund immediately comes out and becomes taxable, according to the Thai tax code. I don't know if the US is the same, but I do know I would have to pay US taxes on it because it would throw me well above the US$85k exclusion on foreign earned income. Oh hell, the thought just occurred to me that since it isn't in a 401k, I should have already been paying US taxes on it.

Good grief, this is giving me a headache.

[Okla-homey]

The whole thing smacks of the constitutionally barred "bill of attainder" to me.

A bill of attainder (also known as an act or writ of attainder) is an act of a legislature declaring a person or group of persons guilty of some crime and punishing them without benefit of a trial. Bills of attainder are forbidden by Article I, section 9, clause 3 of the United States Constitution.

This ain't exactly that, but its too dang close for comfort for me. Who's the next target of congressional punishment by taxation to bolivia? If they can do it to these guys, they can do it to anybody.

[I Am Right]

Stalinist or the new mccarthyism.

[AlbqSooner]

I thought I read that this was structured as an excise tax.

[OhU1]

This tax is legislative practice for the coming "envy taxes" - taxing "the rich" as promised in the Presidential campaign. "Rich" is defined as anymore making more than you do. These so called rich people can pay the taxes for the rest of us.

[Vaevictis]

After some reflection, I think this is a bad idea.

It's going to have some nasty unintended consequences, and may ultimately defeat the purpose of the bailout.

It's going to put affected companies at an unfair disadvantage relative to competitors that didn't take the TARP funds in terms of attracting and retaining employees. We're trying to save these companies, not kill them from brain drain.

They're also talking about making companies that have repaid their TARP funds exempt. This creates an agency issue with the management at these companies, providing incentive to repay as soon as possible so that their own compensation gets taxed at the lower rate. What if it's not in the company's best interest to pay it off early? Yeah.

Knee-jerk reaction here, poorly thought out. Unless somebody knows something about this that I don't know, I hope it gets shot down.

[soonerboomer93]

I don't like the bonus's, but they are a part of their compensation package.

The tax, is a really really bad idea though

[Beef]

Knee-jerk reaction here, poorly thought out. Unless somebody knows something about this that I don't know, I hope it gets shot down.
If by knee-jerk reaction you mean Congress ****ed up on an epic scale by giving this money out with no restrictions and now wants to blame everyone but themselves, then yes, it is. Every Congressperson that voted for this bailout without restrictions should be the ones paying the money back. **** everyone of them. They should pay back the 700 billion to us while they're at it. They forget that this mine and your money that they're throwing around like a hooker's ***** on nickel night.

[Beef]

What's going to stop them from putting a 90% tax on employees in the oil and gas business when oil gets up to $140/barrel again?

[jkjsooner]

This tax is legislative practice for the coming "envy taxes" - taxing "the rich" as promised in the Presidential campaign. "Rich" is defined as anymore making more than you do. These so called rich people can pay the taxes for the rest of us.

I think you've been fooled by the executive's media campaign. This isn't about envy of rich. It is about grossly rewarding failure with taxpayer's money.

I'm not saying there's anything we can do about it now. I am saying that had we not stepped in this company would be bankrupt and nobody would have gotten a bonus so from an ethical standpoint (not a legal one) I have no problem with viewing this company as bankrupt.

I don't like the fact that the tax applies to those who make more than $250k as $250k is not a lot of money in NYC. But that is a side issue.

[jkjsooner]

What's going to stop them from putting a 90% tax on employees in the oil and gas business when oil gets up to $140/barrel again?

C'mon. You can see the difference, right? In one case there was a company that was essentially bankrupt without taxpayer infusion. They took taxpayer money and paid bonuses. These were bonuses that could never have been repaid without taxpayer money and even at the time they were agreed upon it was clear that the company was becoming insolvent. Maybe there's nothing we can do about that now but your slippery slope argument is just an attempt to spread fear.

[yermom]

as long as this is only applying to bailed out companies, i have no problem with it.

of course, i have heard that some companies were pushed into taking the money, which could be a problem

[jkjsooner]

Just an unrelated comment...

Some companies have argued that the restrictions (including bonus restrictions) have kept them from accepting TARP funds. That's fine with me. I can see one of two possibilities here...

1. The company is viable and didn't really require taxpayer money anyway.

2. The company isn't viable but the executives would rather get their bonuses than to accept govt money and keep the company afloat.

#2 wouldn't surprise me as it's just another case of of the executive pay packages creating huge conflicts of interest. It has encouraged excessive risk for short term personal gain. That's why we're in this mess to begin with.

[Vaevictis]

What's going to stop them from putting a 90% tax on employees in the oil and gas business when oil gets up to $140/barrel again?

Was there anything that ever did?

[jkm, the stolen pifwafwi]

I think you've been fooled by the executive's media campaign. This isn't about envy of rich. It is about grossly rewarding failure with taxpayer's money.

I'm not saying there's anything we can do about it now. I am saying that had we not stepped in this company would be bankrupt and nobody would have gotten a bonus so from an ethical standpoint (not a legal one) I have no problem with viewing this company as bankrupt.

I don't like the fact that the tax applies to those who make more than $250k as $250k is not a lot of money in NYC. But that is a side issue.

regardless of what mr. obama wants to say, 250k isn't a lot of money anywhere in the US [insert chris rock wealth rant here].

my concern isn't for the schmucks at AIG who are gambling on getting their windfall just like they spent the last 2 years gambling on bad loans. my concern is with the law sweeping up others who really weren't part of causing this problem (thus the retired UAW guys, etc). my concern is also with how broad reaching mcarth uh franks is being with compensation. what happens if he finds out AIG has some $250/hr consultants cleaning up the mess? is he going to go after them next?

i'm also curious if they've went through the holder list of the credit default swaps to see if any are owned by family of the people at AIG...

[SCOUT]

Does this apply to the Execs at Freddie and Fannie?

[soonerscuba]

regardless of what mr. obama wants to say, 250k isn't a lot of money anywhere in the US [insert chris rock wealth rant here]Uh, you do realize that it represents the top 2% of households in this country and comes out to ~13k a month, after taxes, right? Even in NYC, 250k is more than double the median in an area of inflated wages. It's not generational wealth, but that is an unrealistic sample to base a tax bracket. I would be very curious to hear a city in which 250k wouldn't get you a place to raise a family, a nestegg, and a few bucks to throw around.

[Taxman71]

The gov't already imposes a 20% excise tax on "excessive exec com" such as golden parachutes. If they restrict the 90% excise tax to companies receiving bailout $$, I would be warranted. Besides, companies of that size have well-paid lobbyists in D.C. that can carve out an exception if their bonus comp equates to wages.

[OklahomaTuba]

Lets start taxing everyone we don't like at 90%, like the disabled.

Its a lot better than making fun of them on national TV.

[yermom]

like Special Olympians make any money

that's why it's okay to make fun of them;)

and you wonder why he has a teleprompter :D

i'm pretty incredulous that he said that.

[OklahomaTuba]

I think HE must have a goal of pissing off one group of people every week.

Last week it was wounded war vets, this week its the mentally disabled.

Can't wait to see who gets it next.

[TopDawg]

Probably former Tuba players.

[tommieharris91]

I'm reading another board and I believe this post sums it up.


The public wants money to be spent to stimulate the economy and then the public gets outraged when money is spent to stimulate the economy. The government tells people that money must be spent to stimulate the economy and then the government convinces people to be outraged when money is spent to stimulate the economy. Yes, let's continue this cycle.

[TopDawg]

Just an unrelated comment...

Some companies have argued that the restrictions (including bonus restrictions) have kept them from accepting TARP funds. That's fine with me. I can see one of two possibilities here...

1. The company is viable and didn't really require taxpayer money anyway.

2. The company isn't viable but the executives would rather get their bonuses than to accept govt money and keep the company afloat.

#2 wouldn't surprise me as it's just another case of of the executive pay packages creating huge conflicts of interest. It has encouraged excessive risk for short term personal gain. That's why we're in this mess to begin with.

This is what I don't get. I've repeatedly heard "These bonuses were part of the contracts...we HAVE to honor them." I get that and all...but it just seems a little disingenuous to refuse to acknowledge that this should be a situation where the bonuses in the contracts are reconsidered...and it should be the people receiving the bonuses that are willing to forego them. Which would you rather have: no bailout money and a bonus (or, possibly, no job), or bailout money and no bonus but still pull down 6 figures?

It's a big cluster. Thanks a lot, greed! :mad:

[jkm, the stolen pifwafwi]

Uh, you do realize that it represents the top 2% of households in this country and comes out to ~13k a month, after taxes, right? Even in NYC, 250k is more than double the median in an area of inflated wages. It's not generational wealth, but that is an unrealistic sample to base a tax bracket. I would be very curious to hear a city in which 250k wouldn't get you a place to raise a family, a nestegg, and a few bucks to throw around.

i started ticking off the expenses that a self-employed person would have off of that 13k - medical insurance at 1400 a month, life/umbrella/disability insurance at 1k a month, all dental bills because private dental insurance is worthless, business taxes, 3k a month for retirement, etc. etc. etc) when i realized you are approaching this from an employee perspective. i prolly missed some that OUinFLA can kick in as expenses too.

so point 1, not all income is created equal. yes, 250k is a lot of money when you combine it with employer subsidies (1/2 of your fica, medical, dental, 401k match (and fees paid woohoo), etc).

point 2, you are also making the assumption that the 250k is sustainable. for most people, hitting 250k is a spike. with the current system, they are treated much more harshly for making 250k than someone who has accrued wealth to make that 250k. does it really sound right that warren buffet can cash in 20 or so shares of BH for 250k and get hit at 15% compared with an old lady who liquidates her 401k for retirement and gets hammered at 40%?

[yermom]

how many of those expenses are reflected in taxable income?

but also, this tax isn't about self-employed people is it?

[TopDawg]

and it should be the people receiving the bonuses that are willing to forego them.


NEW YORK - New York Attorney General Andrew Cuomo hopes more AIG employees will return their bonuses, after 15 of the top 20 bonus recipients at the troubled insurer agreed to return their money.

I guess it's a start. (http://www.msnbc.msn.com/id/29843465/)