General Question

walterallenhaxton's avatar

If the government taxes bonuses 90% does that mean that bonuses will have to be 10 times higher to get people to work as hard?

Asked by walterallenhaxton (893points) June 16th, 2009
Observing members: 0 Composing members: 0

23 Answers

syz's avatar

Could you cite some sources? I am not familiar with your statement.

ragingloli's avatar

money is not the only motivator, you know?

robmandu's avatar

You’re talking about the AIG thing.

And it only applies employees of corporations that are recipients of x amount of TARP money.

It does not apply to any other bonuses awarded elsewhere… yet.

In direct answer to your question, yes I think that your math is correct. You get a gold star. ;-)

dynamicduo's avatar

It’s generally best not to extrapolate meaning from one very small case which has no relevance beyond its scope.

Your premise is false. Your government is not taxing all bonuses 90%.

BBSDTfamily's avatar

No, smart companies will find another way to pay out the bonuses without labeling them bonuses… IF the government ever comes to that.

cwilbur's avatar

Probably not, because people don’t pay attention to absolute wealth so much as they pay attention to relative wealth.

The money-driven people who are motivated by bonuses want to get bigger bonuses than anyone else, not necessarily bonuses of a certain size.

robmandu's avatar

I’m motivated by the amount of my bonus… not how it compares to anyone else.

critter1982's avatar

@cwilbur: I disagree. People who get bonuses are driven by the size of the bonus relative to their salary and standard of living. My CEO would laugh at a $100,000 bonus, whereas I would take it and run.

walterallenhaxton's avatar

@dynamicduo The number is not all that important. I got it fro an article. What is important is that people who get bonuses do it for using their mind and other unique talents. So another example for you . A person plays basket ball and has figured that he will be able to do it for 10 years and that he needs 10,000,000$ for his retirement. Would he be willing to settle for 4,000,000$. He knows that do to the wear and tear on his body he will have substantial medical bills that could cost him during his retirement 5,000,000$. Will the bonuses have to be raised back to enough for him to retire or will he simply do something else that he can actually make money at? Don’t get picky about the numbers. I am talking about the price relationship. Should a person be paid for his work or not? CEO’s wear out too.

PandoraBoxx's avatar

Our company doesn’t pay bonuses.

YARNLADY's avatar

I don’t know where you got that idea. My Hubby gets taxed exactly the same on his bonus as he does on his regular salary.

walterallenhaxton's avatar

@YARNLADY The state can tax whatever it wants to tax anyway that it wants to tax it. I read it. I also heard it on the radio.

walterallenhaxton's avatar

@YARNLADY This is an economics question. Economic uses hypothetical situations to reason out the consequences of what would happens if they happened in the real world. It is not an empirical science. It is a deductive one.

YARNLADY's avatar

In my experience, a bonus is awarded after the fact, based on the fact that a job was completed sooner, or better than was originally expected. For instance, I give my yard worker a bonus if he cleans the lawnmower and the sidewalks and trims all the edges, and cleans off the courtyard, in addition to mowing the lawn, and on the times he adds fertilizer and weed killer to the yard.

PandoraBoxx's avatar

By the very nature of the definition of the word “bonus,” it’s unplanned money. Otherwise it would be salary. Getting your undies bunched over a hypothetical a 90% taxation sounds very dittohead-like.

robmandu's avatar

(wonders if anyone ever reads any of the links he posts in his quips)

cwilbur's avatar

@YARNLADY: the bonuses that are prompting this question are the ones paid to the employees of the companies that failed last fall. The question is, if a company is failing, should it really be paying millions of dollars in performance and retention bonuses to its employees? Many people think the answer is NO, and so there’s a suggestion that bonuses for those companies be heavily taxed.

@walterallanhaxton: People should be paid for successful work. A CEO who runs the company into the ground for a seven-figure annual salary doesn’t really deserve the salary he got in the first place, let alone any bonus he may decide to pay himself.

robmandu's avatar

One AIG guy quit with a public resignation letter.

His reasoning was that his job and performance were in no way tied to the failings of the other AIG division. He’d already been working for a pittance in support of all AIG and had counted on that bonus.

If AIG (or any company really) is going to succeed and get out of the hole they’re in, shouldn’t they be able to reward the real, legitimate exemplary employees? Or do we expect that everyone who works there should do so for next to nothing until they pay back the TARP funds?

walterallenhaxton's avatar

@robmandu Sounds like slavery to me. The employees did not take the TARP funds. The company did. Just because you have a contract with someone does not mean that you are responsible for everything they do to get money. Unless of course they are saying that TARP funds are stolen goods.

cwilbur's avatar

@robmandu: Sure, but AIG also paid hefty retention bonuses to people who were part of the problem and who left immediately after receiving their bonuses. This is a common technique in financial companies, when they know they’re in trouble and they don’t want employees jumping ship; but it’s also well known that it just doesn’t work. Employees simply wait until after the retention bonus has been paid in order to jump ship, and at that point the company is both short on employees and out the bonus money.

Also, I have no objection to paying bonuses to exemplary employees, but honestly, if AIG’s compensation had actually been structured to reward behavior that was beneficial to the company, AIG would not have been in the mess it was in in the first place.

robmandu's avatar

@cwilbur, sure. My example just illustrates how government is ham-handed in solving problems. They want to tax at 90% all employee bonuses of TARP recipients (initially just AIG, but you can’t draft law targeting an individual).

It’s frustrating to see government get so deeply engaged with internal corporate machinations… and do so poorly at that.

cwilbur's avatar

It is frustrating, but if the corporations had been healthy to begin with, it wouldn’t be necessary. The sane thing might have been to say that anything that happened before the TARP legislation would be honored—but that would not have assuaged the people who were really pissed off about paying bonuses to people who were losing billions of dollars through what amounted to unknowing fraud.

walterallenhaxton's avatar

@cwilbur AIG has been in trouble for years because it is run by crooks. That said they got in trouble this time because they understood that there was an implicit guarantee by the government on the mortgage bundles they were insuring and so charged the wrong price for the insurance. Much too low as it turned out.

I hate defending those crappy people. The government owed them.

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