he British government announced Wednesday that it would place a one-time 50 percent tax on banker bonuses of more than $40,700. The move, designed to return money from banks to taxpayers, would affect British banks and local subsidiaries of Wall Street firms, which recently shocked Americans by announcing the return of boom-era bonuses just months after receiving government bailout money. France is considering following the U.K.'s lead with its own tax. Should the U.S. take a part of banker bonuses, too? (Watch a report about the British crackdown on banker bonuses)
It's not a bad idea: There's "populist pandering" involved here, says Justin Fox in Time, and the British tax will only raise about $900 million. But these bankers are hardly victims -- they wouldn't have jobs if taxpayers hadn't bailed them out. So my initial reaction when British Chancellor of the Exchequer Alistair Darling announced the one-time bonus tax was, "why the heck not?"
"The UK bank bonus tax"
U.S. bankers' bonuses are safe: "This measure is just too extreme to fly in the U.S.," says David Indiviglio in The Atlantic. A lot of politicians would lose a fortune in political contributions "if they took this kind of punitive action against all of Wall Street." But the U.K. move could help American banks, by making hot-shot bankers think twice about taking jobs in London instead of New York.
"Britain bites into banker bonuses"
It's a political move, and it won't work: "The move is clearly designed to be politically popular," says Dan Murphy in The Christian Science Monitor, in this time of public anger at financial industry excess. "But it’s not likely to end the bonus culture." Banks will find a way to make up for the losses next year, or "quietly defer compensation for some of their stars and make up for it later."
"UK tax on £25,000 bank bonuses: Can it work?"
Taxing bonuses could backfire: Punishing bankers for their perceived role in the financial crisis could backfire on the British government, says Jonathan Ivinson in Britain's The Guardian. Bankers and hedge-fund managers might leave the country, and set up shop someplace friendlier, such as Switzerland. Then the government would lose the billions in taxes these people already pay -- and this bit of "cheap populism" would "prove to be very expensive indeed."
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