Really Congress? Seriously?

Yesterday the House passed its version of a bill that will tax bonus income at 90%. The Senate plans to vote next week and expectations are high that the joint Congressional committee will work out the final law quickly. Yes, it's limited to employees of companies that received at least $5 billion in federal bailout funds. Yes, you have to have household income of $250,000 to be hit by the 90% rate. So no big deal right? This will only affect like, oh everyone who has been working on Wall Street more than a couple of years. But they are all bad, bad people who destroyed the world so it's alright.

Let me put a few points on the interwebz for your amusement. I get that this is an emotional issue as much as anything, but consider:

• Most producing employees at the affected companies earn most of their income in bonus. First year associates earn around $120,000 in salary. Senior managing directors may earn $300,000 in salary. The first, in a normal year, gets 0.5x to 1.5x his salary as a bonus. The latter gets 10.0x to 50.0x. Salaries just don't rise all that much in spite of total earnings rising dramatically. (Let's leave aside the moral discussion of whether these amounts are "fair". Most of us would agree that above a certain level they are not.) Call a spade a spade: Taxing bonus income at 90% isn't far from a 90% tax on all compensation for almost all relevant employees.
• If the goal is to punish the bad men who brought down global finance and by extension put additional burdens on Americans, how does taxing everyone help? To provide just one example: Last year my team produced around $24 million in revenue. About 60% of that was profit. Just six of us returned more than $14 million to our bank's shareholders. We've done that for years and will continue to, unless the opportunity gets legislated away. We take no risk, require no capital, and break no laws. How exactly does punishing tens of thousands of other people on similarly profitable teams across the street accomplish anything productive?
• If we turn the compensation structure upside down, will that make the populists happy? Using the same numbers as before, if top first years are paid a salary of $250,000 and a $50,000 bonus with top senior producers receiving a salary of $15 million and a $300,000 bonus would people feel better? Hey, no more big bonuses; mission accomplished. Some form of compensation shifting is already in the works at most firms. I'm a jaded cynic, but having spent a decade doing finance stuff I'm pretty sure there are at least a couple of people around with the skills and motivation to restructure the numbers and cleanly avoid the intent of this new tax. Should take about one percent of the time it's taking Congress to put the measure in place.
• Retroactive taxation on any bonus paid since December 31, 2008. Americans are okay with this? Really? Here, let me write it again: Retroactive taxation.
• I understand why some people support redistributivist measures. For those who have no intention of earning enough to worry about becoming a target of tax authorities, taking more from "the rich" is seen as a way to increase their own piece of the pie. What makes no sense to me is that other professionals are silent or supportive. Do the doctors, lawyers, engineers, consultants, non-Wall Street financiers and executives believe the mob isn't coming for them? Maybe it isn't; perhaps I'm too close to the situation and completely wrong. I just can't get Martin Niemoller's poem out of my head.

When the Nazis came for the communists, I remained silent;
I was not a communist.

Then they locked up the social democrats, I remained silent;
I was not a social democrat.

Then they came for the trade unionists, I did not speak out;
I was not a trade unionist.

Then they came for the Jews, I did not speak out;
I was not a Jew.

When they came for me, there was no one left to speak out for me.

We're over the edge of the slippery slope and it's a long way down.