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It seems that no matter what Wall Street firms do they win.
First they are on the brink of disaster, or so we are told and the government bails them out with taxpayer money. No problem as long as the economy doesn’t collapse.
The economy doesn’t collapse although many individual investors lose much of their net worth. But not these firms.
The firms (Goldman Sachs, JP Morgan, etc.) wind up raking it from various fees, including fees charged to the government.
In fact the Wall Street firms did so well that they are handing out $200 billion in bonuses for 2009.
And to add insult to injury the compensation packages, including bonuses that the firms have given their employees will wind up saving the top three firms a fortune in taxes.
The NYT reports that “Many American banks already pay minuscule federal income taxes, because of various deductions and clever tax planning; the payout-related breaks will reduce their tax bills further in coming years… Altogether, the top three Wall Street banks — Goldman Sachs, JPMorgan Chase and Morgan Stanley — will gain nearly $20 billion in tax breaks based on their employee compensation this year.”
The total tax deductions for all Wall Street firms for 2009 will be approximately $80 billion. Goldman Sachs, which is technically taxed at a top corporate rate of 39 percent, will save about $9 billion in federal income taxes on the bonuses it pays out for 2009. In 2008 Goldman Sachs paid an effective tax rate of just 1%. It will probably be similar this year.
I would like to have an effective tax rate of 1%. May be those in Congress who are so worried about tax increases to support health care reform, climate change legislation, etc. should take a closer look at the loopholes that allow these firms to have such low tax rates.