The Administration's proposed "Responsible Wall Streeter Tax Credit"
The Congressional Budget Office estimates overall losses from the collapse to be about $7 trillion but figures only about 10 percent of that sum will be claimed by Wall Streeters seeking the tax credit because of the reluctance of some executives and traders to take responsibility for the financial mess. That would put the cost of the new program at about $700 billion -- roughly the amount the federal government is now paying to bailout the Street.
In effect, the plan redirects the bailout money to these honest executives and traders who fess up and take responsibility. It's a win-win-win. They get to clear their consciences, which is a first step to clearing up their balance sheets. At the same time, they get big tax breaks which will cause them to spend more, and thereby stimulate the economy. And the plan won't cost taxpayers a dime more than we're already spending on the bailout, since the bailout money will go to these honest executives and traders.
One potential glitch: Many Wall Street executives and traders don't pay enough income taxes to take full advantage of the tax credit. Their earnings come in the form of capital gains, taxed at 15 percent, or they're parked in the Netherlands Antilles and other tax havens. The only way around this is to make the RWSTC fully refundable. That way, executives and traders who don't pay enough income taxes to get the full benefit of the credit will be able to collect it anyway, in the form of a direct cash subsidy from the federal government.
A step in the right direction, but it doesn't go far enough in carrying out the Obama administration's policy.
The problem the Obama administration faces is demand deflation or how do we keep the credit bubble fully inflated.
Instead of offering Wall Streeters (and only humble Wall Streeters, at that) tax benefits etc., their Bloomberg terminals should be hooked up to the Federal Reserve Board computers. They could then be authorized to print and stuff in their wallets as many Federal Reserve Notes as they think appropriate and their spouses deem desirable.
The money supply would be increased, prices would rise, and the crisis would be solved.
April 1, 2009 9:41 PM | Reply | Permalink
I'm impressed! This is one of the finest examples of the power of brainstorming that I have been fortunate enough to witness.
April 2, 2009 11:00 AM | Reply | Permalink
Larry Summers leaked this to you, didn't he?
April 1, 2009 9:53 PM | Reply | Permalink
Either Mr. Reich wrote this completely drunk, or that's a nice April's Fool.
April 1, 2009 9:59 PM | Reply | Permalink
Although, to be fair, handing out taxpayer money to Wall Street in the way suggested in the article would probably be more efficient and transparent than what Obama and Geithner have planed.
April 1, 2009 10:15 PM | Reply | Permalink
April Fool's day, forsooth!
Obviously Sec. Reich is earnestly attempting to restore the science of mammonology to its pristine condition, to bring back good Saint Adam's gold-standard days[1], when marketism and moralism were one and the same!
___
[1] 16 June 1723 – 17 July 1790
April 2, 2009 9:03 AM | Reply | Permalink
Too funny. Well played sir.
April 1, 2009 10:41 PM | Reply | Permalink
funny funny har har
April 1, 2009 10:48 PM | Reply | Permalink
Agree it does not go far enough.
Citibank, at a minimum, should be provided with their own treasury presses to print US dollars, preferably the big denominations. It is the only way to assure they will start lending again to people who can't pay them back.
April 1, 2009 10:52 PM | Reply | Permalink
Although, an unfunny suggestion came out today (I hope it's serious) came from Geithner on posting assets online and having people assist in figuring out the prices for the assets.
April 1, 2009 10:54 PM | Reply | Permalink
"posting assets online and having people assist in figuring out the prices for the assets."
You mean actually bid on those "toxic assets"?
Who would be dumb enough?
April 2, 2009 10:03 AM | Reply | Permalink
Just knowing that they know that we know that they caused all this mess makes it all worth while to me! Great program.
April 1, 2009 10:55 PM | Reply | Permalink
My only problem with focusing so much on the moral turpitude of Wall Street sharks is that these guys were mostly just playing by the stupid but perfectly legal rules of the stupid but perfectly legal system that we and our stupid representatives in Washington designed.
The Europeans have the right idea here. The incentive system in our financial sector is way out of kilter. And wherever there is a large amount of money to be moved around and played with, you are going to attract a lot of people who are skilled in the arts of siphoning wealth off the productive labors of others. The allure and potential of racketeering are built right into the fabric of a capitalist economy. You need eternal vigilance to keep these guys out of the weeds.
Let's stop whining about how greedy and irresponsible these people are and work on designing a system of laws that doesn't incentivize greed and irresponsibility.
April 1, 2009 11:15 PM | Reply | Permalink
Heard this on NPR today where Reich actually concluded by announcing it was an April Fools Joke.
April 1, 2009 11:55 PM | Reply | Permalink
If its not April fools, I take good news anywhere I can find it and it might as well come from someone I honor and respect.
Thank you for writing at our small site from time to time.
April 2, 2009 12:43 AM | Reply | Permalink
Don't thank Reich.
Thank his computer; it drops his musings here, automatically.
April 2, 2009 12:46 AM | Reply | Permalink
Oh Ellen, some of us must have some fantasies. Geeeeeeeez. HA
April 2, 2009 1:02 AM | Reply | Permalink
I think 20 dollar bills could be printed with a smiley face (temporarily - only until the plan is effective. I am not trying to replace Andrew Jackson). The way people would get a lift when spending money and thereby spend more money which would create even more demand via a multiplier effect and with all this spending and extra demand the nation would be lifted out of the rececession/depression it is in. The cost of the plan is zip and I think this should end all doubts as to the merits of the plan. Of course, some people have strange reactions to smiley faces and would commit suicide around the third 20 dollar bill spent but to save the nation the price is worth paying.
April 2, 2009 12:45 AM | Reply | Permalink
Have a nice day, zed.
April 2, 2009 12:47 AM | Reply | Permalink
I would also have Treasury officials wear smiley face armbands. That would surely make for an upbeat stock market. :)
April 2, 2009 10:07 AM | Reply | Permalink
In fact they *already* get this credit, really, via a tax break that's been on the books for years: capital loss offsets allow them to use all stock losses as tax deductions, until the losses are completely used up, either as offsets against capital gains or against ordinary income (maximum: $3,000 per year).
April 2, 2009 9:47 AM | Reply | Permalink
So, when I lose $300,000 in the "market", I can use a $3,000 tax deduction for 100 years?
Wow!
.
April 2, 2009 11:01 AM | Reply | Permalink
If you work on Wall Street, $3000 per year isn't worth stooping over to pick up off the sidewalk. Come to think of it, I would probably do a Jack Benny pause if I spotted it first.
April 2, 2009 11:05 AM | Reply | Permalink