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Should the U.K. Tax Banker Bonuses at 50%? Should We?

I haven't completely thought through the pluses and minuses of the one-time, 50-percent tax on banker bonuses that British Finance Minister Alistair Darling just proposed, but it definitely sounds appealing at first blush. Here's how the Times describes it:

Banks will be charged a 50 percent tax on 2009 bonuses of more than £25,000, or $40,800. It will be imposed on the pool of bonuses paid by a bank, rather than individual payments, and it will be paid by the bank — not by the recipient of the bonus. It will take effect immediately and will affect banks’ 2009 profits.

As the piece notes, it doesn't seem unreasonable to hit banks with the tax even if they didn't get direct state support, given that the entire industry benefited from a government subsidy in the form of unusually low interest rates. I'd add that the entire industry also benefited from the government serving as a backstop not just for specific companies, but for the entire financial system, since it's hard to believe ostensibly unaffected companies wouldn't have experienced amazing stress if not for the bailouts of their more troubled rivals. In this country, for example, it's certainly hard to believe things would have been peachy at Goldman had AIG gone under. (I know, I know, Goldman says it had hedged it's AIG exposure. But, even if you grant that, what about its "complete-financial-market-meltdown" exposure? It doesn't seem like that's particularly hedge-able.)

Aside from whether the tax is fair, I guess it's worth wondering about perverse consequences. Not surprisingly, bank executives in the City of London are claiming they'll see mass defections abroad if the proposal becomes law. But Felix Salmon makes several good points in response:

[T]his is the genius of a one-off, nationwide supertax: while any individual banker might be able to move overseas, they can’t all do that en masse. And in any case moving overseas doesn’t alter the tax status of this year’s bonus, while next year’s bonus will go back to normal taxation levels — most probably under a more plutocrat-friendly Conservative government, to boot.

Also, the fact that Britain is about to do this makes it more attractive in this country. There are, after all, only so many global financial centers out there--at least ones where American bankers would move. Not having Britain as an escape valve seems likely to make a U.S. version even more salient (and vice versa). And, again, the motivation for leaving would be to avoid future tax-uncertainty, since, as written, the tax would only apply to 2009. Alas, "future tax-uncertainty" doesn't seem like a great reason for uprooting your life when you're already doing incredibly well.

The downside, as Salmon notes, is that leveling one-off, mostly-retroactive, semi-confiscatory taxes at politically unpopular groups isn't something you'd want to become a fixture of the government's tool kit. But the circumstances do seem to justify it in this case.