This is why I stuck on ‘radical’ instead of ‘liberal.’ Because left or right, politics is a conservative business where people don’t want to rock the boat or upset the status quo. I don’t think one could get a sitting president to consider the tax reform I laid out even in the most flush time of economic prosperity.

I would love to see the tax code simplified, but with the unfortunate state of the economy, there’s no way Obama would support a move that would put half the IRS out of work. Not if he still hopes to “save or create” 3.5 million jobs.

I agree more than disagree with your evaluation of the code’s sloppiness in this area and likely with your verdict on the sincerity behind the bill. Of course, being on ‘the left’, I come to different final conclusions. :)

I am not in favor of using the tax code to curb executive compensation either, honestly. I am simply against tax dodges by which corporations or individuals avoid paying their taxes. I believe the current system is broken and requires radical overhaul. Absent that, a marginal rate increase (which would affect corporate executives, among others) may be necessary. I am too much of a New Dealer to LIKE raising taxes in a recession/depression, but the current debt burden may be too high to avoid it.

I would prefer to see a radical overhaul of the tax code (http://eclecticradical.blogspot.com/2008/06/fixing-roof-when-house-has-bad.html) but I don’t expect it to happen.

At a glance, 162(m) looks like an insincere Clinton nod to the left that actually greased the wheels of the free market. The loopholes are so obvious I can’t believe his administration wasn’t aware of them.

But I’m not a fan of using the tax code to curb executive compensation anyway. What’s next, Bruce Willis and Derek Jeter having their compensation capped? That’s too much government interference for the libertarian in me, and not enough demonstrable benefit to the public for my more centrist sensibilities.

IRC 162(m)limits a corporation’s ability to claim deductions for executive pay over a set ceiling. However, ‘performance based bonuses’ are entirely exempt. So when a corporation pays an executive a nominal salary (in this case one dollar) and gives said executive the bulk of their wages as a ‘bonus’ based on the ‘performance’ of the executive or department, the corporation can write the entire paycheck off its taxes and still pay its executives whatever it pleases. While these bonuses have to meet ’set standards’, the law allows the company shareholders to approve those standards. Since most corporate boards either control the majority of a company’s voting stock, represent those who do, or control the proxies for the majority of a company’s voting stock, this means the standards a company’s bonuses have to meet is set by the company itself. Rather a large loophole.

The point being that by paying their employees one dollar a year in wages and the real paycheck in bonuses, the corporation can write off the entire paycheck for every executive.

Ergo, when someone agrees to such a payment scheme, they are willingly participating in a tax dodge.

Oh, and my use of your construction metaphor was a matter of convenience, and not an endorsement of the utility of said metaphor. :b

If one were dumping the old people and hiring new people, I should point out that it would not be difficult to make sure people were hired for actual salaries instead of ridiculous non-salary/all-bonus payment schemes. So they would not, logically, HAVE to work for peanuts. In my view, though I am certainly not trying to say such a law should be invoked retroactively if passed, we need to make that illegal. If it were a straight commission system, that would be one thing. But a one dollar a year salary and a high six figure bonus is a tax dodge that drives everyone’s rates up over time. It’s only possible because of the Bush administration’s tax exemptions for bonus pay and it is part of the cycle of stupidity (a cycle that includes Reagan and Clinton as much as it includes W. Bush) that led to this problem. Another reason for my lack of sympathy. They willingly entered into a tax dodge, which weakens their claims of ‘innocence.’ I’m sure one could find qualified people for a legitimate, generous pay-scale not incorporating such a tax dodge and not including non-incentive based bonuses. Particularly if the ridiculous loophole that encourages such a ridiculous payment system were closed.

I will just say that if you try to build a house from the roof to the foundation, you fall down. Repeatedly. :)

If extreme care isn’t taken in terminating outstanding trades, the risk to taxpayers would be even more mind boggling than it is right now, and that’s untenable. If there are people other than current AIG execs able to handle these transactions and willing to work for peanuts, let them step forward. If not, as distasteful as it might be, let’s pay these people their contractually obligated bonuses and stop threatening and harassing them so they can finish disassembling the Financial Products unit.

I’ve got a lot on my plate, so I’ll leave the marginal tax debate for another day, but as I’m sure you’ve guessed, I’m more of a roof to foundation girl when it comes to economics.

Re: Wall Street types ending up in Treasury, that’s not my preference either, but I do think it would be nice if the government could attract more candidates from the same pool as Wall Street, and that includes economists and businesspeople. There are, of course, other measures the government can and should take to attract qualified candidates, not the least of which is repealing the DOMA so government agencies can compete with corporate America for all available talent.