Bonuses Could Be Taxed at a Rate of 50%
Last week I mentioned France would be seeing a new but insignificant tax on carbon emissions and considered the possibilities, including possible reactions, if a similar tax was initiated here in the United States. Both political sides are criticizing this tax and it’s not expected to be effective in terms of its goal of encouraging non-carbon-based fuels.
Meanwhile, the United Kingdom has approved a new tax that will likely be more effective at its goal: raising money for the government. Banks who have employees in the U.K. will pay a one-time tax for every employee who earns a bonus over £25,000 (about $40,000). The company, not the employee, would be required to pay 50% of the amount of the bonus that exceeds £25,000.
In the United States, despite high unemployment and a public that is not very enthused about Wall Street bankers slated to receive some of the biggest bonuses ever distributed, it’s unlikely that such a massive tax would be approved by the government. For the sake of the economy, politicians generally stay on the side of big business. It is apparent that companies want to keep their top talent and are willing to move mountains to ensure they can pay their star employees whatever the market demands.
With the United Kingdom, it’s likely we’ll see companies pay the tax and maintain their level of bonuses. I expect the same thing would happen on this side of the Atlantic; with banks making money once again, they would be willing to take the tax expense and the reduction of shareholder value if it means keeping the talent they want to keep.
Do you think the United States would see a bonus tax rate of 50%, even if it is just a one-time event?
Photo credit: damo1977