Monday, March 16, 2009

What's fair?

I just wrapped up tax returns for a client who made $1.4 million last year.

That ranks up there with one of the larger incomes ( outside of capital gain income ) I've ever put down on a return.

Now the question.

How much should this taxpayer pay in taxes? What's the fair amount? Liberals are so quick to point out that the rich don't pay enough. Well, tell me how much this pariah should pay to cover his fair share.

By the way, AIG is becoming everyone's whipping boy so let me be one of the few to defend these bonuses.

First, for many large corporations, keeping your best people is a necessity. One of the things companies do to keep their best on the hook is to pay them a decent "base" wage but then back load their compensation.

Why? because if the employee leaves before the end of the year they get nothing. It's an enticement to keep people around.

In addition, many compensation packages are designed for tax reasons, who's responsible for the horrendous tax laws. Hint, not AIG.

Second, many of the people at AIG getting these bonuses have nothing to do with the derivative mess the company is in.

Think of a car lot. I'm head of the new car division which is bleeding money but you run the used car division which is kicking ass. So what would be your words for the owner who says "Well, there's no money to pay you your bonus because the new car lot lost money". What would be your response? If there is an agreement to pay the used car dealer his bonus, you can't simply not pay it. You'll lose your great used car guy.

Third, these are contractual arrangements, you can't simply not pay them. In a court of law you will lose 100% of the time. So don't pay and then you'll have to pay it anyway along with attorney fees.

I gave up being envious of rich people a long time ago. I think back on my career decisions and if had made the "right" career decisions I could be making big bucks at a large accounting firm. I gave that up because the thought of going to a rubber chicken dinner every night and pretending you like certain people struck me as not worth the compensation. But I get that some people are willing to put in the hours and uproot their families for the promise of making big bucks.

In addition, I can assure you that if I want to reach one of my richest clients on a Saturday. I won't waste my time calling their house. I call their business where they are working their asses off. How many people are willing to do the same?

I think it's time that the bozos in government quit pitting Americans against each other and if you're one of these people who hold a grudge against someone who makes more than you.

What the hell is wrong with you?

3 comments:

Anonymous said...

http://news.yahoo.com/s/ap/20090316/ap_on_re_us/senator_investigation_trial

Guess what party he's from.

Anonymous said...

I agree wholeheartedly. I will make one minor case for those who wish to put the breaks on AIG bonuses.

AIG has taken oodles of public money. Do I think it is wise business to back out of a contract or to pay people less than what they are worth? No. But I think it's a good precedent to set to have companies realize that when you start taking public money you have invited your compensation to be managed in full view of the public.

It might make some companies think twice before letting themselves get bailed out in the future.

That said, this public scrutiny of AIG compensation is surely going to take them down the same craphole of inefficiency that every federal agency is already in.

gordon gekko said...

Anon #2

I guess here is how I would counter...

If the public doesn't like the compensation structure of the company, why are they bailing it out in the first place?

When I draw on my line of credit, my bank doesn't ask me where the money is going. They don't demand that I pay them back before my employees.

The same is also true when the bank is the US Government.

AIG has to pay back all that money.

If the feds don't believe they have the ability to do so, they should have left it go and picked up the remaining pieces after the fact.

This whole episode says more about the government than it does AIG.