Money will make Wall Street honest
TEXT OF COMMENTARY
Steve Chiotakis: Last week, we heard details of the bank bailout, along with an ambitious fiscal plan. This week, the Obama administration is tackling the ailing auto industry. So far, Wall Street is reacting positively to moves by the administration to kick start our economy. But the debate over additional spending vs. tax cuts continues. What else does the President have up his sleeve? According to commentator Robert Reich, a new, bold idea will soon be unveiled.
Robert Reich: The administration is about to launch a new plan designed both to stimulate the economy and also clean up Wall Street at the same time. The plan consists of a one-time tax credit going to Wall Street executives and traders equal to their individual share of responsibility for the nation's financial collapse.
The Congressional Budget Office estimates overall losses from the collapse to be about $7 trillion, but the CBO figures only about 10 percent of that sum will be claimed by Wall Streeters seeking the tax credits, because of the natural reluctance on the part of some executives and traders to take responsibility. That would put the cost of this new program at about $700 billion -- roughly the amount the federal government is now paying to bailout the Street.
The really ingenious part of the plan is it will redirect the bailout money to these honest executives and traders who fess up and take responsibility. Get it? They get to clear their consciences, which is a first step to clearing up their balance sheets. At the same time, they get big tax breaks which will cause them to spend more, and thereby stimulate the economy.
And the plan doesn't cost taxpayers a dime more than we're already spending on the bailout, since the bailout money will just be redirected to these honest executives and traders. Everybody wins.
The one problem I see with the plan is that many Wall Street executives and traders don't pay enough income taxes to take advantage of the tax credit. They either receive earnings in the form of capital gains, taxed at 15 percent, or they store what they earn in the Netherlands Antilles and other tax havens.
The answer is to make the new "Responsible Wall Street Executive and Trader Tax Credit," as it will be called, fully refundable. That way, executives and traders who don't pay enough income taxes to get the full benefit of the credit will be able to collect it anyway, in the form of a direct cash subsidy from the federal government.
Believe me, this plan will work. Happy April 1.
Chiotakis: You didn't think we could let this day go by without pulling your leg just a little bit? Our thanks to Robert Reich for cooking up this imaginary plan. He teaches public policy at the University of California, Berkeley.