The Financial Crisis Responsibility Fee: A Possible First Step

On November 6, 2009 we made a post detailing how almost all citizens feel completely betrayed by both government and private institutions. They see that the government is acting for special interests, not the public good as required by the constitution. To restore our nation we stated that:

The citizens require a strong program that will absolutely guarantee that the psychology and ethics that led to the betrayal is completely disgraced and placed outside the American system forever. It is critical that those in the entities who were responsible for the meltdown are publically identified and punished. There must be significant retribution with large sums recovered for the people who innocently suffered. The public consequences to those that caused the situation must be adequate to prevent any thoughts of ever returning to similar behavior.

The banks however have been operating under the assumption that their only obligation toward the citizens suffering from the economic meltdown they caused is to repay the TARP funds at some point. They expected no further consequences for the misery they have caused the nation. They are reporting large profits and intend to reward themselves with record bonuses-while the rest of the nation suffers.

The announcement by the administration of its intention to impose a Financial Crisis Responsibility Fee* on banks with over 50 billion dollars in assets is the first credible indication that the necessary consequences may be coming. It could mean that the cozy financial sector/government relationship is starting to unravel under the relentless anger of the US citizens. Of course the 90 billion dollars expected to be recovered in 10 years is minuscule compared to the damage done to the nation. But at least it initiates a principle of collecting consequential damages that should deter future similar behavior. Watching how congressmen react to this bill will be a real marker for those who must be replaced.

As currently described the bill will only apply to banks with over fifty billion in assets and will be structured so that there will be a strong incentive to pay the fee from the planned excessive bonus pool. This will protect the smaller banks and prevent the large banks from simply passing the fee through to its customers. It is indeed meant to have the large banks who acted against the public good suffer additional consequences.

The drumbeat of the bank lobbyists against the bill is already underway. There will be a very aggressive effort to have it either killed or weakened with loopholes. Hopefully this will not end as a Republican versus Democrat issue. We must follow the life cycle closely and be sure that our congressman and senators understand that regardless of their party affiliation you expect them to act in the public good. Follow their statements and votes very closely. Its will be a good warm-up for the many battles we have yet to fight.

No Taxes on Tips versus Taxes on Hedge Fund Managers

The tavern is back in business, with a new owner but the previous diverse customer mix. A recent topic of discussion was how money talks more than the people do. The following sequence of events is a perfect example.

Ron Paul entered HR 3664, the “No Taxes on Tips” Bill. His rational for the bill was as follows:

“It is an outrage that waiters, waitresses, and other service-sector employees have to pay taxes on the tips they earn. The IRS makes an estimate of how much service-sector workers will make in tips, and taxes them on it even if the taxpayer did not actually earn as much as the IRS' estimate!

Tips provide a substantial portion of the income of many service-sector employees, many of whom are young people just trying to make a few extra dollars to get through school, or single parents often balancing two jobs while trying to make enough to raise a family. This tax amounts to nothing more than the federal government punishing these employees for working hard and doing their jobs well.

I have introduced H.R. 3664 in Congress to end this problem. The Tax Free Tips Act of 2007 will exempt tips from federal income and payroll taxes. Ending taxes on tips will give workers an immediate pay raise, letting them keep more money to put toward things like a house or car payment, their retirement, or their own and/or their children's education.

When you give someone a tip, you should not have to simultaneously tip the federal government.”

A tip is pure free enterprise where the server provides a service and the recipient determines the price based upon satisfaction. It is not salary. This effort by Ron Paul to correct an unjust error received exactly zero coverage in the media. It is almost certain that no action will be taken by congress.

Now look at government money-guided treatment. It was provided to managers of hedge funds who are exploiting a loophole in the tax code that allows them to pay a 15% capital gains tax rate on their million dollar plus annual incomes. They should be paying the top 35% ordinary income tax rate. The fund managers get no sympathy from tax scholars, who point out that the current tax system inexplicably singles out fund managers for favorable treatment to the disadvantage of other workers and investment firms.

An attempt to fix this multi-billion dollar theft released a torrent of lobbying and misleading information from the financial community. President Bush himself has sanctimoniously come out against “raising taxes on hard working Americans.” There is now resistance from both parties to any change, including Senate Finance Committee Democrats John Kerry of Massachusetts and Charles Schumer of New York. Nothing has happened.

Government for the people? Now where should we go to get one of those? What do you say, Congressman?