Tax Bank Bonuses and Capital Gains of Wealthy to Pay for Jobs Program
By Robert Creamer
Jan. 11, 2010 - This column is about pornography.
Yesterday's New York Times ran a front page story
headlined: "For Top Bonuses on Wall Street, 7 Figures or
8." The story was chocked full of obscenity:
"Bank executives are grappling with the question that
exasperates, even infuriates, many recession-weary
Americans: Just how big should their paydays be?" asked the Times.
"Despite calls for restraint from
chafed public, resurgent banks are preparing to pay out
bonuses that rival those of the boom years," it
continued. "The haul, in cash and stock, will run into
many billions of dollars."
"Industry executives acknowledge that the numbers being
tossed around -- six-, seven- and even eight-figure sums
for some chief executives and top producers -- will stun
the many Americans still hurting from the financial
collapse and ensuing Great Recession."
"During the first nine months of 2009," the Times
reported, "five of the largest banks that received
federal aid -- Citigroup, Bank of
Sachs, JPMorgan Chase and Morgan Stanley -- together set
aside about $90 billion for compensation."
The Times piece quotes a Wall Street insider who
apparently has avoided being infected by Wall Street's
inability to see past greed and understand what's going
on in the real world. John Reed, a founder of Citigroup
said: "There is nothing I've seen that gives me the
slightest feeling that these people have learned
anything from the crisis.... They just don't get it.
They are off in a different world."
I'd say. These people must live on the planet Xenon. Or
perhaps they are time travelers from the Palace of
Imagine a new, revised version of Moby Dick. In this
version, Captain Ahab's obsessive pursuit of obscene
wealth -- rather than his pursuit of the Great White
Whale -- has destroyed the ship and left all of the
ship's company in danger of drowning. But this time, the
ship's crew valiantly salvages a lifeboat and rations --
and rescues Ahab from certain destruction.
Now, in the last chapter, instead of acknowledging that
his decisions led the ship to ruin, instead of thanking
his crew for saving his life, he demands that he receive
a massively disproportionate share of the lifeboat's
rations -- hundreds of times that of the average sailor
-- which he insists should be his because "he, after
all, is the captain -- and the market for captain's
rations demands it."
The author of this new version of Moby Dick has proposed
two alternative endings to this saga. All present assume
the captain is daft, and he is put under the supervision
of the ship's dashing young doctor. Or he is simply
What are these people thinking? Last month, Americans
lost an additional 75,000 jobs and these people are
arguing over whether they get 7- or 8- figure bonuses
for making brilliant trades at the great Wall Street casino?
When we say people are out of work, we are saying more
than that they are not receiving income. We're saying
that they are not productively employed creating the
wealth that contributes to society's well-being. From
the standpoint of the economy, the work that they would
have done -- the wealth that they would have created
while they are unemployed -- is gone forever.
The real economy is made up of the total sum of that
kind of real work. It constitutes the sum total of the
energy and creativity of all of the construction
workers, and teachers, and doctors, and software
engineers, and waitresses, and farmers -- who actually
create real wealth -- who provide the goods and services
that we need to live fulfilling lives.
From the standpoint of creating real economic wealth --
of making goods and services -- many of the people who
are debating whether they get 7- or 8-figures bonuses
are actually "unemployed" themselves -- or at least
unengaged in doing productive work. They are not
creating new furniture, or driving a product to market,
or writing a computer program that helps cure a disease.
Many of them are simply betting on the price of one
derivative, hedging his bet with another derivative,
taking risks with other people's money -- and trying to
become as rich as possible. They are professional
gamblers. From the standpoint of the economy, many of
them are parasites who simply feed off of other people's labor.
And what's truly amazing is that, like our latter-day
Ahab, it was their reckless pursuit of their own greed
that destroyed the economy -- cost so many others their
livelihoods -- and caused such massive waste in the
economy at large. Many of those people who are now
unemployed -- eager, but unable to contribute
productively to our common store of wealth -- are unable
to do so because these people, personally, wrecked our
They, and their institutions, were rescued by the
taxpayers -- the people who actually produce wealth for
a living. Yet not a word of contrition. Not a thought
that they don't deserve hundreds of times the income of
average Americans -- a massively disproportionate share
of what's left of the fruits of everyone else's work --
even though the total economic pie has been diminished
because of what they did. Amazingly, they are now
grabbing a larger share than ever.
The real need in our economy is to put our fellow
Americans back to work -- back to the task of creating
goods and services -- as soon as possible. Right now
everyone in that lifeboat needs to pull an oar. And most
Americans desperately want to.
The Federal Government needs to act immediately to get
businesses to increase employment by stimulating more
demand for its products and to provide the funds to
directly to employ people into productive activity
through state and local government and the Federal
The Federal Government is the only entity that can do
this, and Congress will be shirking its most basic
responsibility if it refuses to do so.
The first priority for Congress must be to get people
employed. Every day we wait to employ them, we allow
their labor to go to waste.
Much of the cost of creating those jobs could be covered
by following the lead of the British and imposing a big
tax surcharge on the bonuses paid by the big banks.
Another portion could be paid by raising the income tax
rate on capital gains to the same level as ordinary
income for all the individuals making more than $250,000
and the couples making more than $500,000. Be clear. I'm
not suggesting taxing the pension income or college
money of average Americans -- just the capital gains of
the wealthiest Americans.
About 70% of all capital gains goes to 3.5% of the
population. I'm suggesting that the wealthiest of those
pay taxes on capital gains at the same rate that they
would if they got the same income by working.
When you think about it, it's absurd that "ordinary
income" -- the income generated when you work for a
living -- is taxed at up to 35%, and "capital gains" --
income generated when your stocks, bonds, or derivatives
appreciate -- is taxed at 15%.
It makes no sense at all that the marginal income of a
middle manager who makes $50,000 a year is taxed at 25%,
and the income of a wealthy person who spends his time
on the French
is taxed at 15%.
The percentage of income going to the largely
unproductive financial sector has skyrocketed in the
last two decades. Let's tax that income to put the
people who actually produce goods and services back to work.
To those who argue that this would reduce the incentive
to come up with "innovative financial products" or
clever trading schemes, I say that's exactly the idea:
to decrease the incentives our economy provides for the
best and brightest to waste their careers gambling on
Wall Street instead of doing something productive for our economy.
Ronald Reagan once famously said: "When you tax
something you get less of it." Precisely.
to tax speculation, and incentivize productive work.
And most importantly, nothing -- including increasing
the deficit -- should stand in the way of a crash
program to put
costly to our economy, and our economic future, than the
waste of unemployed Americans who are unable to
Robert Creamer is a long-time political organizer and
strategist, and author of the recent book: "Stand Up
Straight: How Progressives Can Win," available on Amazon.com.