Category: Taxes

F%$# the Shareholders, They Are Worthless Punks

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I don’t think that. I own shares in a number of Vanguard®‘s funds, but it’s clear that’s what the banks, and the bankers think about their shareholders.

We know that the UK is allocating a special levy on bonus funds for financial institutions, which will shrink the size of the bonuses that bankers get. The banker’s solutions is to increase the size of the pools to maintain the same outrageous bonus levels.

The way that these bonuses are supposed to work is that you allocate a certain percentage of profits in a publicly held firm to a bonus pool, based on the needs of the firm, things like profits, the need for cash on hand, and things like dividends for the shareholders, who are, after the people who own the f%$#ing company.

Well, that’s not how the bankers think, so when that pool gets taxed, you just take it out of the hides of the shareholders, and financial reserves, etc.

This is way beyond mismanagement. This is theft, just like what Conrad Black went to jail for, and it should be treated as such:

Bonuses are supposed to be determined by the amount of money available after you settle accounts for the year. If you decide it by starting from how much you want to pay for yourself, you are doing what Conrad Black did, and he’s now in prison:”

Several of the big US banks, and some UK banks, conceded in private that they were nervous of cutting the bonuses of City staff, partly for fear of causing internal friction, and partly to avoid having top staff picked off by bolder rivals or hedge funds

Disgraceful. Particularly when these guys were the ones who f%$#ed up our system in the first place.

Banking is not a meritocracy, not that it was ever much of one, it’s a kakistocracy.

I Really Want to Live in the UK

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Well, we now have the details on Alistair Darling’s proposal to tax bonuses in the UK, and it looks very good: It’s a 50% tax on all bonuses in the banking industry in excess of £25,000.00 ($40,700).

What is interesting is that this is not a tax on income, but a tax on the bonus reserves themselves, so it avoids the human rights:

Instead of legislating for a levy on individual bankers, the Treasury has focused on the simpler and potentially legally safer route of taxing the bonus pool used by banks for staff compensation.

The recipient of such a bonus would still have to pay personal income tax, so, if he would normally have received a bonus of £100K, he would get a bonus of £50K, and that would be subject to taxation by Her Majesty’s Revenue and Customs. (see also here)

It disincentivizes the huge bonus awards, and it fills a significant hole in the UK budget, raising £550 million this year, and £3 billion in the future.

In any case, Bloomberg decided to waste a reporter’s day by making him write a story about how it probably won’t happen in the United States.

Well, duh, banks here are largely succeeding in gutting financial reform here.

Make them pay their fair share of taxes? Fuggedaboudit!

Its a Death Trap, It’s a Suicide Rap*

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Ah, yes, the “centrists” in the Senate. They are what Obi Wan Kenobi was speaking of when he said, “Never will you find a more wretched hive of scum and villainy.”‡

Their latest “gift” to the rest of us? They are proposing a commission in order to create a back door way to defund Social Security and Medicare.

In this case, it’s Senate Budget Committee Chairman Kent Conrad, (DINO-ND) along with Senatior Judd Gregg (R-NH):

The commission’s main goal would be to figure out what the country needs to do to get its budget back on a more balanced track.

Specifically, the commission would suggest ways to curb spending growth — especially in Medicare, Medicaid and Social Security — and to boost tax revenue.

There is a simple solution: You just raise the maximum income taken for social security, and let it cover everything that is remuneration, and it’s solvent forever.

In fact, it’s solvent enough that it can fix the medicare funding issue too.

Of note is how this committee is structured, with 18 members, 8 of each party appointed by Congress, and 2 appointed by the White House, and that it would require that at least 14 of the 18 members approve any report, which would be submitted to Congress for an up or down vote.

So, for any tax increase, you would need at least ½ of the Republicans to approve, and you won’t get one.

It’s a Trojan horse, and should be left outside the gates.

It fills the gap, and then some, while

*Apologies to the Boss. It’s a line from Born to Run†
†That’s Bruce Springsteen to those of you who are musically illiterate.
‡Star Wars, you remember that? It was a minor film released in 1977 by the director of THX-1138.

Wishing That I Was a Brit

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Chancellor of the Exchequer Alistair Darling will be levying a tax on excessive bonuses:

Alistair Darling will try to force a “permanent culture shift” in the City as he announces a one-off punitive super-tax of more than 50% on the bonuses of tens of thousands of bankers as the centrepiece of the pre-budget report.

The chancellor intends his targeted, one-off levy as a clear message that the City has to “start living in the real world” as the financial sector prepares to lavish hefty payouts on its staff.

The new super-tax rate will be aimed at any bonus above a fixed rate, rather than the basic salary of the employee. It is intended to hit many thousands of bankers, but low-paid staff in bank branches will be exempt.

The tax will be set higher than the 50% income tax rate coming in from April for those earning more than £150,000 a year, sources indicate.

Needless to say, the bankers don’t like this, calling the measure, “populist, political and penal.”

I think that they meant the statement as a condemnation, but I found it to be a complement, though I do like the alliteration.

The details are not clear, but I would suggest something on the order of 93% of anything in excess of £400,000.

Pelosi Comes Out in Favor of Tobin Tax

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Hopefully, this will give Timothy “Eddie Haskell” Geithner the vapors:

A proposed tax on financial transactions “has a great deal of merit” and would help Congress raise needed revenue, U.S. House Speaker Nancy Pelosi said Thursday.

“I believe that the transaction tax still has a great deal of merit,” Pelosi said at a news conference.

The tax would have a “really minimal impact on the transaction, but a tremendous impact on helping us meet our needs,” Pelosi said.

Timmeh….Suck….on…This…

Honestly, I expect Obama to oppose this fiercely in private, though I am not sure what he will do in public.

Krugman Goes for the Tobin Tax

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So, we have another Nobel Prize winner who argues that a small tax on financial transactions in order to generate revenue for stimulus and to discourage speculation is a good thing.

He also lays some whup-ass on Timothy “Eddie Haskell” Geithner for his opposition to the idea, which is a good thing, and further notes that much of the short term leverage that nearly destroyed the world financial system was an artifact of rapid fire speculative trades.

One item of note is that Krugman makes a very good point about the fact, notwithstanding the claims of opponents, it will be difficult for anyone to avoid paying the tax:

The main argument made by opponents of a financial transactions tax is that it would be unworkable, because traders would find ways to avoid it. Some also argue that it wouldn’t do anything to deter the socially damaging behavior that caused our current crisis. But neither claim stands up to scrutiny.

On the claim that financial transactions can’t be taxed: modern trading is a highly centralized affair. Take, for example, Tobin’s original proposal to tax foreign exchange trades. How can you do this, when currency traders are located all over the world? The answer is, while traders are all over the place, a majority of their transactions are settled — i.e., payment is made — at a single London-based institution. This centralization keeps the cost of transactions low, which is what makes the huge volume of wheeling and dealing possible. It also, however, makes these transactions relatively easy to identify and tax.

This is true. While I might, find a local vendor on the street to exchange currency in Cairo, Egypt, because I could beat the official rate, and avoid a tax of less than ¼%, if I were trading millions of dollars, I need to have a place where I can settle the transactions, and taxes would be assessed there.

It would be hard to implement without the US being on board, which is where the real rub is.

Wrong!

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Nancy Pelosi is now saying that any financial transaction tax must be internationally agreed on:

Any tax imposed on financial transactions would have to take effect internationally to keep Wall Street jobs and related business from moving overseas, U.S. House of Representatives Speaker Nancy Pelosi said on Thursday.

“It would have to be an international rule, not just a U.S. rule,” Pelosi said at a news conference. “We couldn’t do it alone, we’d have to do it as an international initiative.”

This is wrong on a number of levels:

  • There is already such a tax in the UK, and it has been there for years, and London’s “The Street” still rivals Wall Street.
  • The US had a tax on stock purchases well into the 1960s, and it did not chase investors over seas.
  • The idea that much of the financial industry would go elsewhere is a bad thing is simply misguided. Above a certain proportion of GDP, it becomes a source of parasitic loss, and detracts from our economic well-being.
  • If we wait for international consensus, it will never happen.

I’m just saying.

When They Ask You Money for a Stadium

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Remember the Silverdome, in Pontiac Michigan, which cost $55.7 million to build, and was just sold for $583,000.00, not much more than a nice house.

Not a bad deal, when you realize that it also includes a sizable lot as well:

As a result, Leeb said, Pontiac could ill afford to continue paying $1.5 million in annual upkeep for the stadium. With a private owner, the property “will go back on the tax rolls,” he explained.

The 80,000-seat Silverdome was the biggest stadium in the National Football League when it was built in 1975 for $55.7 million [about $220 million in 2009 dollars]. The stadium, which sits on a 127-acre plot, is also the former home of the National Basketball Association’s Detroit Pistons.

Something should be done about the legalized extortion that pro sports franchises engage in, but I don’t expect to see this in my lifetime.

When Do We Prosecute This?

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Yet another example of the fabulous “innovations” that our modern financial industry have given us.

It turns out that when Atlanta had a bond issue, they went to a consultant to review the bids, and this consultant, David Rubin, ruled out the winning bid, costing the City $58,000 by going with the runner up Bank of America.

The problem was that David Rubin had a piece of that Bank of America action, and was not working to the best interests of the city:

Only after the Internal Revenue Service investigated five years later did local officials learn that Rubin’s firm, CDR Financial Products Inc., had entered into a secret side agreement with the Charlotte, North Carolina-based bank. CDR’s share would be worth as much as $340,000, based on city and federal records.

“IRS believes that CDR, Bank of America and possibly others may have colluded to fix pricing,” an unidentified Atlanta employee wrote in an undated internal memorandum after city authorities met with IRS investigators in September 2005.

This is a theft of honest services, a felony, and likely a RICO violation too, and it looks like Mr. Rubin is going to jail.

The real problem here is that municipalities are entering into agreements which are too complex for them to evaluate, and so their taxpayers are getting done like a drunk sorority girl on prom night.

About F@#$ing Time

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It looks like the IRS has set up a new unit in the organization to go after the tax dodges of the wealthy:

A new Internal Revenue Service enforcement unit targeting the very wealthy will help the tax agency decode partnerships, offshore trusts and other complex techniques used to hide income, IRS Commissioner Doug Shulman said Monday.

Dubbed the Global High Wealth Industry group, the unit will launch “a small number” of audits of individuals with assets or income in the tens of millions of dollars, Mr. Shulman told an accountants’ trade group. An IRS official said the group would begin work on these initial audits in the next month.

The high-wealth group, housed in the IRS’s large- and medium-sized business division, marks a sharpening of the IRS approach to auditing the very wealthy. Its creation is a response to the complex web of entities and transactions many high-net-worth individuals use to manage their financial affairs.

This is good for a number of reasons:

  • The wealthy are, as Willie Sutton didn’t say, “where the money is.”
  • The tax dodges that they have used have become increasingly more sophisticated, and need a dedicated team with the forensic skills in order to pursue these tax cheats.
  • Allowing rich people to evade taxes is corrosive to society, tax collection, and budget decisions, and create an environment where politicians say that you can’t raise taxes on the rich, because they will just weasel out of them. (see Bush, George W.)
  • If everyone believes that the rich do not pay their share, they will be less inclined to pay their share too, and the cooperation of the taxpayer is crucial to our system working.

Now what they need to do is go go criminal prosecution, with jail time, on the some of the worst offenders.

Of Course They Don’t, The Wall Street Owns Them

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Click for full size

Note: These numbers are inflation adjusted

So, after Gordon Brown finally comes out in favor of a Tobin tax on financial transactions, Timothy “Eddie Haskell” Geithner comes out categorically against it:

A day-by-day financial transaction tax is not something we are prepared to support,” Geithner said in an interview with Sky News. In his concluding press conference, Geithner was asked repeatedly to say why he opposed such a tax on banks and indicated he doubted its effectiveness.

“This idea (of a bank transaction tax) has been around for a long time…I think frankly the experiences are mixed,” he said, expressing an American view that there was no widespread backing for such a tax.

The banks f%$#ed us all, we spent to bail them out than on, “WW1&2 (omitted from graphic), the moon shot, the New Deal, total NASA budgets (omitted from graphic), Iraq, Viet Nam and Korean wars — COMBINED,” but somehow it’s unreasonable to place a tax on speculation, to:

  • Reduce speculation.
  • Pay for their own bailout.

The Obama administration has its tongue so far up Wall Street’s ass that it is tasting tonsils.

Not Enough Bullets: Fat Cat Tax Evader Edition

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Floyd Norris documents the latest outrage, that Goldman Sach is looking at buying tax credits from Fannie Mae.

The idea here is that Fannie Mae is losing money, and is federally owned now, so it can’t use the tax credits, so it sells them to GS for something like 80¢ on the dollar, screwing the taxpayer.

Goldman, you may recall, was saved with taxpayer money when the panic spread last year. A naïve person might think such a company would see a patriotic virtue in paying taxes.

Fannie Mae is currently a ward of the government. So this boils down to a proposal to pay Uncle Sam perhaps 15 cents to avoid paying 20 cents to Uncle Sam. The gall involved in even proposing such a thing is awesome.

It also points out one reason companies pay so little in taxes. These tax credits exist as a nonbudgetary way of stimulating investment in low-income housing. It would be a lot cheaper for the government to simply subsidize that, but instead it offers tax credits so there is no “expenditure” for foes of big government to criticize.

Seriously, we need someone to move in and break heads, but the Obama/Geithner/Summers troika has no interest in challenging the excesses of Wall Street.

What Atrios Said

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As Atrios notes, the idea that some “moderate Democrats” are pushing for, a Bipartisan commission to propose spending cuts and tax hikes, is really, really, Really, REALLY stupid.

First, there are no Republicans on the national level who will support any new taxes, and second, look at the “Democrats” who are supporting this.

According to the article, a “group of 10 senators — nine moderate Democrats and an independent,” so and so the article definitively fingers the following people:

  • Senator Evan Bayh
  • Senator Kent Conrad
  • Senator Joe Lieberman (Not explicitly named in the article, but note the quote, it sure as hell ain’t Bernie Sanders.)

MY comment, if you are serious about cutting the deficit, place a Tobin Tax on financial transactions, you raise money, reduce the deficit, reduce speculation for its own sake, and punish the banks.

That’s a win-win-win-win scenario.

Hoocoodanode?

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So it turns out that the industry gave us the phony property assessment to qualify for home mortgages is low fraudulently employing the tax credit for first-time home buyers:

The Internal Revenue Service is examining more than 100,000 suspicious claims for the first-time home-buyer tax break, another sign of potential trouble for the soon-to-expire program.

I am gobsmacked that realtors and mortgage brokers might game the system.