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The Taxpayer Clawback

Submitted by Jon Henke on Mon, 05/04/2009 - 09:06
in

A few weeks ago, Obama said it was an "outrage" for an organization "that finds itself in financial distress due to recklessness and greed" to pay "any bonuses" to employees.  Congress and President Obama ultimately passed punitive "clawback" legislation to tax these deals at an absurd 90%, basically nullifying contracts on a whim and after the fact.

It was the usual Democratic demagoguery (sadly, joined by many Republicans): "Somebody, somewhere is rich. And you're not.  Torches and pitchforks for everybody!"

Well, remember the "tax cuts" Obama promised?  Turns out the federal government itself is also "in financial distress due to recklessness and greed", and "The government is going to want some of that money back."

Clawbacks for everybody! (except politicians, who have yet to make any substantive sacrifices)

Bottom Line: Policies tend to have a lot more to do with preserving politicians, winning the news cycle and helping "favored political constituencies" than with establishing dependable, sustainable and objectively good rules.  Government has the biggest Principal-Agent Problem of all.

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Not so

Submitted by Jim Dandy to th... on Mon, 05/04/2009 - 09:41.

I've seen this particular dishonest talking point out since last Thurs.

From your link:

 

The tables, however, don't take into account several common categories of taxpayers, experts said.

For example:    --   A single worker with two jobs making $20,000 a year at each job will get a $400 boost in take-home pay at each of them, for a total of $800. That worker, however, is eligible for a maximum credit of $400, so the remaining $400 will have to be paid back at tax time -- either through a smaller refund or a payment to the IRS.

 

What this article is actually saying is that the tax tables are not yet matching the realities of certain workers in special cases, not that ""The government is going to want some of that money back."

At this point in the Next Right, you would think that Cantor-style weasel politics would be given a rest?  Don't you yet realize it insults the intelligence of anyone who can read and follow a web link?

"Tax cuts"

Submitted by Jon Henke on Mon, 05/04/2009 - 10:46.

You don't get to run on "tax cuts!" and then put "I mean, tax credits that you have to pay back" in the footnotes.   You don't get to say the American people know Obama is giving them a tax cut because they see it in their paychecks and then take it all back next year because, oops, you didn't see what you thought you saw.   You don't get to promise "tax cuts for 95% of Americans!" during an election year, and hide the clawback in a non-election year.  A tax credit is not a tax cut.

It seems you don't understand the tax cut

Submitted by joejoe on Mon, 05/04/2009 - 10:59.

You *do* get to say "you will get a $400 tax cut" and give people a $400 tax cut.  What is happening is that, if you have 2 jobs and don't properly take the right number of exemption, you'll get $800 of your $400 tax cut, so you'll get a smaller refund when you file taxes.

That *already* happens if you don't properly list your exemptions.  It's nothing unique to this particular tax cut.  It happened with the Bush tax cuts and just regular taxes as well. 

 

How foolish

Submitted by Lonestar Bill on Mon, 05/04/2009 - 09:54.

Bottom line: The government will want the money back. Not suprising, Geitner never has been very good at figuring out this whole "tax table" thing.

Interesting Article

Submitted by joejoe on Mon, 05/04/2009 - 10:58.

Except for the fact that the entire premise is wrong.  The 90% clawback tax never passed.  It never even got close to passing. 

Thanks for the reference

Submitted by cr on Mon, 05/04/2009 - 11:03.

Thanks for posting the Principle-Agent problem. Much of the discussion between partisans get bogged down into B.S. because the problems are non-partison phenominons that neither understand. Essentially, there is the way you want things to work and then there are they way things (people) do work.

I've alway been a flat tax kind of guy. I don't think a flat tax is more fair, it's that people are essentially unfair and will always game a system (reps or dems) for whatever suits their constituencies. In reference to a dead famous philosopher . . . if the tax code didn't exist, politicians would invent it just for the sole purpose of differentiating themselves against their opponents.

-----

On a brighter note; however, it seems Obama is trying to change the tax system (oversee loophole). Will this be an improvement or a 'meet the new boss' scenario. We'll see in two or three years.

"the banks own the Senate"

Submitted by RisingTide on Mon, 05/04/2009 - 11:04.

yes, such wonderful favored constituencies! such adorably productive favored constituencies!

Such bribable politicians. Such blackmailable politicans.

Not about the money

Submitted by Dutch on Tue, 05/05/2009 - 13:00.

I don't think that the "outrage" about failing businesses paying bonuses had anything to do with envy of others who are rich.  It had everything to do with "bonuses," which sounds like a reward or incentive based on individual or corporate performance, being paid to those whose firms did not perform well.

The problem may be a semantic one; perhaps the payments were normal compensation and not "bonuses."  But the outrage is tied to that word.

Pawnshops New England

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