So, our American colleagues are at it again. People on the
streets are burning effigies of the erstwhile business
heroes of Wall St. The rabid "Freedom" fanatics in Arizona
are frothing at the mouth and sharpening their hunting-knives;
writing names of their enemies on the end of their large
calibre ammunition - but instead of Democrats & civil rights
activists, they are scrawling the names of the ex-"Masters of the
Universe". Even the usually calm, collected American Senate
are baying for the
public ritual suicide of hapless bank bosses in a statement
that seems scarily reminiscent of Edo-Era Japanese
politics.
Saint Obama looks like he's going to take what, in America at
least, may be considered to be an even more extreme approach.
Instead of cutting the bankers' gullets, he's going for them where
it'll really hurt -
their bonuses. Geithner has proposed a
retrospective 90% tax on bonuses awarded to institutions that
have received state help from the $100 squillion rescue
package. There are serious legal problems that could be
encountered if Obama does go down this road. Far be it for us
Brits to judge what our allies on the other side of the pond are up
to, but if the measures proposed over there were decided to be
implemented over here, there would be a very real constitutional
issue raised:
Retrospective taxation.
Fact: nobody likes taxes. They are, however, necessary
fuel for the organs of the state to function. They drive the
motors of a functioning democracy. However, there is a line
that should not be crossed. More despotic monarchs have tried
taxing everything from the number of hats you
own through to how many windows you have
in a house - which led to some particularly unusual
architecture. More oppressive tax-measures are often
closely followed by revolutions, assassinations or coup
attempts. The most unwelcome types of taxes are those which
are levied for past-acts. Imagine if an income-tax raise were
backdated and the catastrophic effects this could have on your
finances. Although prima facie a catastrophic impact
on fat, greedy bankers seems like a good idea - this would set a
very dangerous precedent. America is in the midst of a
tumultuous financial crisis which could get worse. Imagine
the financial carnage if there were precedents for governments to
retrospectively tax their own populations!
Business could also be affected on a wider
scale. If this law is passed, then any bank
or other lending institution that wishes to use
the government to recapitalise will (if it has
any business acumen) will realise that
their executives will be legally obliged to return any bonuses
they are awarded to the government. This will discourage
recapitalisation from the largest pot of money available,
which will have a knock-on effect on businesses that
want to borrow money in order to trade.
Although the prodigious greed of bankers is abominable, is it
right that the norms and rights of a whole nation should be eroded
for the purpose of clawing back what is, after all, a drop in the
ocean compared to the multi-trillion dollar debt of the teetering
Superpower?