Tax fear may move bonuses earlier

[frigidmagi]

MSNBC

[quote] Congress is debating tax rates, and that has Wall Street nervously eyeing the calendar.

Worried that lawmakers will allow taxes to rise for the wealthiest Americans beginning next year, financial firms are discussing whether to move up their bonus payouts from next year to this month.

At stake is a portion of the hefty annual payouts that are a familiar part of the compensation culture on Wall Street, as well as a juicy target of popular anger. If Congress does not extend the Bush-era tax cuts for the highest income levels, a typical worker who earns a $1 million bonus would pay $40,000 to $50,000 more in taxes next year than this year, depending on base salary.

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Goldman Sachs is one of the companies discussing how to time bonus season, according to three people who have been briefed on the discussions. Pay consultants who work with major Wall Street companies say that just about every other large bank has also considered such a move in recent weeks.

With tax politics in Washington unpredictable, bank executives have spent months sketching out several options for their bonus plans, including the possibility of an earlier payout. Lawmakers have been trading accusations across a partisan divide, but after this weekend, it appears likely that a compromise will extend the tax cuts for all income levels.

Even so, the banks’ discussions about bonus timing underscore how focused the industry is on protecting every dollar of pay.

A spokesman for Goldman declined to comment. Bonus payouts are traditionally shrouded in secrecy; companies are required to disclose their top executives’ pay, but they do not disclose the size of their total bonus pools in their public filings or internally.
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Goldman, not surprisingly, is the canary in the coal mine. It often announces its top executives’ bonuses before other firms, and the richness of its payouts sets the tone across the industry.

This year the tax debate has imposed a new wrinkle, and executives at two large banks said their companies tentatively decided not to speed payouts, unless Goldman did. Then, these two executives said, they would consider paying early as a competitive measure, so that their workers were not upset.

These executives and the people briefed on the Goldman discussions spoke only on the condition of anonymity.

Bonus timing is also being discussed at scores of public companies, beyond banks, for top executives who receive multimillion-dollar payouts around the turn of the year. At most companies outside the financial sector, an early bonus would help only a handful of executives, while on Wall Street, the benefit would apply to many more workers.

“This has been a topic of conversation among those of us who are involved in designing and administrating compensation plans,â€

[Derek Thunder]

Sadly I've been hearing rumors that Obama will cave and allow the GOP to ensure that the rich remained undertaxed.

Sadly, you're quite correct. It's not all bad, but it basically just kicks the can down the road for the wealthy, and I don't think liberals will be in a more favorable position to allow tax cuts for the wealthy to expire in 2012.

US President Barack Obama has announced a bipartisan agreement has been reached to extend soon-to-expire Bush era tax cuts to all Americans.

Referring to the bitter wrangling over the issue, Mr Obama said he would not "let working families become collateral damage for political warfare".

Some Democrats have said the deal, which must be voted on by Congress, is too generous to the wealthy.

Unemployment benefits will also be renewed under the agreement.

The BBC's Steve Kingstone, in Washington, says the deal represents a climb-down by President Obama.

It marks a reversal of his position, first laid out in his 2008 campaign, that tax cuts should only be extended at incomes up to $200,000 for individuals and $250,000 for couples.

Following November's mid-term elections, Republicans took control of the House of Representatives and increased their power in the Senate.

Mr Obama's announcement came two days after the US Senate rejected President Obama's preferred tax plan.

Elements of the framework deal include:

* A two-year extension of income tax cuts for all Americans enacted in 2001 and 2003 under former President Bush
* A 13-month extension of unemployment benefits for the long-term unemployed
* A 35% tax for two years on estates worth more than $5m
* A Social Security tax cut that would see the tax drop from 6.2% of pay to 4.2% for one year
* Allowing businesses to write off all their capital investments for tax purposes during 2011
* Extending the Earned Income Tax Credit, the child tax credit and tuition credits

'Grave injustice'

Mr Obama said there were elements of the deal that he opposed - including an extension of tax cuts for the wealthiest 2% of Americans.

But he said striking a deal with Republicans was more important than allowing the tax cuts to expire on 1 January 2011 amid a political stalemate.

He said it would be a "grave injustice to let taxes increase" for ordinary Americans.

"Make no mistake, allowing taxes to go up on all Americans would have raised taxes by $3,000 for a typical American family and that could cost our economy well over a million jobs," he said at the White House.

Republicans praised the president's decision following the press conference on Monday night.

"I appreciate the determined efforts of the president and vice president in working with Republicans on a bipartisan plan to prevent a tax hike on any American and in creating incentives for economic growth," said the Republican leader in the senate, Mitch McConnell.

Mr Obama's announcement at the White House on Monday was held shortly after the president's return from a trip to North Carolina, where he said Congress must "make sure we're coming up with a solution, even if it's not 100% what I want or 100% what the Republicans want".

It also came a week after the government reported that joblessness in the US had risen in November to 9.8%.

With the agreement on tax cuts finalised, analysts say Congress may now focus its attention on holding a debate over whether to ratify the New Start Treaty, which seeks to reduce the nuclear arsenals of both the US and Russia and allow each to inspect the other's facilities.

[Dark Silver]

Yes Mr President, it's not about getting 100% of what you want, or 100% of what the Republicans want...

Except that it's pretty much 100% of what the Republicans wanted in the Tax agreement. You caved into them, AGAIN.

[Derek Thunder]

The Obama adminstration is like Lando Calrissian all over again.

[frigidmagi]

Lando got Leia out of Cloud City.

[Stofsk]

Lando's awesome. I will not stand for any bad mouthing of Lando Calrissian.

[Derek Thunder]

I'm sure Luke Skywalker agrees - "Hey, I have one less hand and I found out that Vader was my father before my Jedi training was complete, but yay Lando!"

[Batman]

Yeah. It's totally not like Lando was up against the Empire and could do jack all about Vader changing the terms of the deal, or using Cloud City as the stage of the game.

[SirNitram]

Since I really don't care which party gets what it 'wants', I'm more looking at the policy view. Frankly, over a year of UI benefits, tax modifications proven to be the most effective(Those on workers and such), and lots of R&D credits for business. The price? The GOP's tax cuts(Which they would attach to everything next year), and only a partial restoration of the estate tax.

And this is just the deal itself. This is what will be handed to the Congress. Where big Dem majorities can still attach amendments. Including stripping entire sections out, if it please them.

Want some party politics with your facts? Consider this: The GOP is already facing splitters on this. With the Senate Dems against this without changes(Which they can make!), there's no way to gather the majority. Dems have a chance to tailor this to themselves, and the GOP is again looking crazy because they're objecting over benefits for the unemployed.

Ideal, no. But if it dies, it can be dropped on the GOP's lap.