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joshua’s journal

Corporate Salary Cap

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People are asking whether or not this will hurt New York - the answer is yes. Our state taxes these Wall St. bonuses heavily, and knowing the size of these bonuses our state is surely about to lose out on billions in income taxes. It makes you wonder whether or not the state's budget had that "revenue" incorporated into their current and future budget predictions, and how that might affect next year's $12 billion budget deficit.

So - here is where we are. We're happy that these crooks are going to have their income controlled by the government as long as they are borrowing taxpayer money. However, if these fat cats are going to be paying billions less in taxes due to earning less income, who do you think is going to be closing that budget gap? YOU are, one way or another. Isn't that a bitch?

They won't shrink the size of government and spend responsibly. New York State politicians do not have the will to tell people that they've overspent and made obligations they never could have afforded, and now we are about to have to deal with that problem in a harsh way.

Addition of federal tax money to states in this $1T federal orgy will only exacerbate the problem. Politicians who are afraid of possibly having to get a real job would rather sell the state out than tell the people the truth - that the budget has been too big for too long, and that Albany relied on unusually high tax receipts from Wall St. (and now we know why) over the past 5 years to pay for expansion of government programs that wouldn't be sustainable otherwise. Right now, instead of acting responsibly and paring the budget down to match realistic tax receipt projections, they are waiting to make a decision until that $160B for states is released. Cute, huh?

Not to mention that our state (and our county, and our city...) does its budgeting backwards, thinking of what to spend on before understanding how much you actually have to spend.


344 words

💬 6 comments

  1. janelle ·

    An article I read in the NY Times indicated that the bonuses were not included in the salary cap.

    :::link:::

    Shareholders have a say in bonuses above the cap amount and there's not limits on what they can reward. And it doesn't apply to the 350 institutions that already applied for bailout funds.

    It seems like it might take time to see just how much of an impact it will have on the NY state budget. But I hear ya on the budget. See what you have first, then budget accordingly. Basic budgeting 101.
  2. hodown ·

    This salary cap is also not retroactive. All the fatcats basically get to keep their salaries. Honestly- I think this one was a lot of hot air that won't amount to much.
  3. jason ·

    I'm more concerned about their bon bon eating, luxuriating, not working, gold-diggin ass WAGs are going to do. Oh heavens!
  4. james ·

    Because NYS is so dependent on sales and property tax we actually have a regressive tax structure, which is absolutely insane. So, I wonder what kind of impact this will have on a county by county level.

    But the proposal from Obama has no teeth in it what so ever. I have to wonder if it is a warning shot, appealing to these fat cats basic survival instinct to not be such fucking dicks with our money.
  5. joshua ·

    @janelle - yeah, I read the same article this morning! The legislation specifically does not ban bonuses and so that is technically true. But the legislation does limit cash compensation to top executives(which is important - they still cannot be paid above $500,000 in cash regardless of how or when it is delivered) and it does restrict the selling of stock options until after the government has been paid back. So a CEO can still be paid $500,000 cash and $20,000,000 in stock to be sold after Uncle Samuel gets his. Who knows when that will be? This will still affect the behavior of Wall St., as you can see by the reaction to the law from yesterday's market activity. The street ain't happy... but as far as I'm concerned, screw them!

    Another point that article made that is interesting to point out - this limit only applies to top executives. The "golden 25" or "golden 50," as it were. If you are a junior executive, or an extraordinarily well paid floor trader, etc., you can still earn millions of dollars. I don't particularly have a problem with that and don't see it as an issue. These people aren't the Madoffs or the Fulds of the world, and last I checked it was still perfectly legal to earn a lot of money in the United States. The design is to limit the pay of these top-flight "golden parachuters" who ruin their companies and end up with hundreds of millions.

    e:jho - we'll see about how effective it is... I fully expect that these guys will find other ways to compensate themselves at the expense of the company and its clients. Plus, as the article highlights (or perhaps laments...), it doesn't address the companies who haven't taken government money. Wall St. will still pay out lots of money and people are going to wonder why, not realizing that it won't affect people who didn't go to the gov't for help.

    In the end though, even a $1B reduction in tax receipts from Wall St. would drastically affect our state budget, so from my view even a modest reduction in executive compensation as a result of this law will result in loss of tax receipts that Albany will find tough to handle at the moment. Can we expect that the law will function in the way it was meant to? Nobody knows. We're already at the point where our state government is using a $600+ SUNY tuition increase solely to close a $1.7B state budget gap, which by the way has little to do with education and a lot to do with mismanagement.
  6. joshua ·

    Goddammit, I wrote a monster response only for it to disappear...

    I'll summarize what I was going to tell janelle - I read the same article! While it is true that bonuses are not outright banned, the method and time structure of these payments will be affected, and that is causing anxiety on the street. The rule will still have an effect on our state tax receipts, even if the reduction in bonuses was modest, say $1B off of that nearly $19B that was just paid out. Even a $1B change would freak Albany out right now.

    For example, let's take a look at this thief from Countrywide, Angelo Mozilo. :::link::: In 2006 he was paid almost $3M in base salary, $20.5M in cash bonus and an additional $72.2M in stock. Under the rules right now, the bonus payment wouldn't be allowed, his base salary would be reduced 80% and he would not be allowed to extract any of the money from his stock until Uncle Samuel got his first.

    I think there is a question of how effective this will be, but what most people don't realize (because they aren't being told by anyone) what it means when they say that only those who took taxpayer money will be subject to these changes. Most firms on Wall St. did not take taxpayer funds and will pay their executives whatever they like. I think the popular assumption is that Wall St. bonuses are going to be drastically reduced, which will probably not be true. For my part, I'm simply looking at how even a modest change would be big news for our state.

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