As Wall Street firms prepare to hand out record levels of bonuses, a group of lawmakers on Capitol Hill have co-sponsored a bill that would slap a 50 percent tax on many of the bonuses.
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The Wall Street Bonus Tax Act, H.R. 4426, was introduced by Rep. Peter Welch, D-Vt., and is co-sponsored by 23 other House members. The bill would tax bonuses at firms that have received assistance through the Troubled Asset Relief Program at a rate of 50 percent for all bonus compensation in excess of $50,000. Revenues generated by the tax would fund a new direct lending program administered by the Small Business Administration.
Fifteen months after the American taxpayer threw Wall Street a life preserver, its biggest firms are about to break their own records of lavish, excessive and unearned bonuses, said Welch in a statement. Paid for by hardworking Americans who continue to struggle through tough economic times, these bonuses are Exhibit A that Wall Street has not learned its lesson.
Welchs bill follows similar actions taken by Great Britain and France to tax excessive bonuses. A 50 percent tax on bonuses above 25,000 pounds in the United Kingdom is expected to raise more than 2 billion pounds in revenue, or roughly $3.2 billion.
Revenue generated by H.R. 4426 would fund a temporary, direct, small-business lending program modeled after the SBAs 7(a) loan program. It would offer low-interest, government loans to otherwise healthy businesses that are having trouble obtaining the credit they need for operating expenses and expansion.
Welchs SBA direct lending program would help compensate for a distinct drop in lending to small businesses by TARP recipient firms. According to CNN, the 22 banks receiving the most in Treasury assistance have scaled back small-business lending by $11.6 billion since April of last year.