Sunday, March 18 , 2018, 12:25 pm | Fair 57º


Capps Supports Wall Street Bonus Tax Legislation

Revenues from the tax would fund a direct-lending program for small businesses

Rep. Lois Capps, D-Santa Barbara, signed on to legislation introduced by Rep. Peter Welch, D-Vt., to crack down on excessive Wall Street bonuses and help small businesses obtain the credit they need to survive and to create jobs in this challenging economic environment.

The Wall Street Bonus Tax Act would tax bonuses at firms that have received assistance through the Troubled Asset Relief Program at a rate of 50 percent for all compensation in excess of $50,000. Revenues generated through the tax would fund a new direct-lending program administered by the Small Business Administration.

“For too long, Americans on Main Street who played by the rules have been forced to pay for the excessive risk taken by a few on Wall Street,” Capps said. “American families continue to struggle with the effects of this difficult recession, yet many of the financial institutions they had to rescue are now prospering and reverting back to some of their bad habits. Firms that were bailed out by taxpayer funds should have the common sense to know that large bonuses during this difficult economic period are inappropriate, particularly as they continue to deny loans to well-qualified small businesses. This legislation addresses this lack of this common sense among certain financial institutions while additionally providing relief to small businesses struggling to obtain access to credit.”

“As most Americans struggle to endure a long and wrenching recession, the same Wall Street bankers who came to the American taxpayer with hat in hand are now preparing to pocket record-breaking bonuses,” Welch said. “Financial firms that received taxpayer assistance must remember that they owe their return to profitability to hardworking Americans.”

Wall Street banks are expected to announce soon bonus packages for the year. According to The New York Times, five of the biggest banks to receive federal assistance last year — Citigroup, Bank of America, Goldman Sachs, JPMorgan Chase and Morgan Stanley — have collectively set aside $90 billion for compensation. Goldman is expected to pay employees an average of $595,000, while JPMorgan is expected to pay an average of $463,000.

Welch’s 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 — about $3.2 billion.

Revenue generated by the bill would fund a temporary, direct small-business lending program modeled after the SBA’s 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.

The 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 2009.

— Emily Kryder is the communications director for Rep. Lois Capps, D-Santa Barbara.

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