Senator Webb Would Amend Financial Reform Bill to Add Measure Taxing Bonuses
An amendment to the Senate funancial reform bill (S 3217) would tax excessive Wall Street bonuses. The measure is co-sponsored by Senator James Webb (D-Va) and Senator Barbara Boxer D-CA) . The Webb-Boxer measure, which is essentially their earlier introduced Taxpayer Fairness Act, S. 2994, would impose a 50 percent excise tax on the bonuses of employees at banks, financial firms, and Fannie Mae and Freddie Mac, that exceeded $400,000 in 2009. Any employee who received a bonus larger than $400,000, the salary of the President of the United States, would have to pay a 50 percent tax on the portion of the bonus over $400,000. This is a one-time tax on firms that received more than $5 million in TARP and other federal emergency assistance funds. It affects only bonuses received this year that are based on performance in 2009. The revenues generated would be used for deficit reduction.
CBO conservatively estimates that this amendment will raise at least $3.5 billion. The amendment is supported by Senators Durbin and Lincoln, among others.
The Taxpayer Fairness Act, codified as Title XIII of the Dodd bill would add a new Section 4999A to the Internal Revenue Code imposing the tax on any covered employee who receives a covered excessive 2009 bonus, which includes a retention bonus. Covered employees are defined as both as employees of the company and non-employee directors of a major federal emergency economic assistance recipient.The Act defines major federal emergency economic assistance recipients as financial institutions of which the federal government acquired an equity interest of more than $5 million pursuant to a program authorized by the Emergency Economic Stabilization Act of 2008, as well as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac)
The Act authorizes Treasury to adopt regulations to prevent the recharacterization of a bonus payment as a payment which is not a bonus payment in order to avoid the tax or to prevent the avoidance of the tax through the use of partnerships or other pass-thru entities.
The senators attempted to add the Taxpayer Fairness Act to the recently passed HIRE Act, but their amendment never came up for a vote.