December is a busy month. Between shoveling, shopping, and preparing for guests it’s easy to miss one of our great, overlooked annual traditions: it’s bank executive bonus season. This year the holiday giving is especially meaningful. Sustained unemployment and the rise of Occupy Wall Street have made extreme bonuses all the more troubling. In fact, when you tally up recent Securities and Exchange Commission reports, the bonus and compensation pools of the seven largest U.S. banks are on track to grow 3.7% to a grand total of $156,000,000,000.
While jumbo-bonuses are on-their-face outrageous, they present a deeper problem: can our state and country afford to idle our money in the hands of the super-rich? What we pay in bank bonuses is money that could be used to put people back to work.
Some of the problems of unemployment are obvious. When someone loses their job, they lose income and health insurance. They can’t pay their bills and may lose their home. But other effects of unemployment are little harder to see. Unemployment is the idling of talent. Right now, somewhere in America, our next great social media innovator is out of work. Right now, skilled caregivers are looking for work while seniors across Minnesota could use their help.
The problem of idle capital is similar. Right now many of America’s banks and corporations are sitting on unprecedented amounts of cash. In mid-2011, non-financial corporations in the U.S. were sitting on over $2 trillion in cash. Rather than using the money to create jobs, they have spent lavishly on mergers and acquisitions, stock buybacks, dividend payments, and, now, executive bonuses. The double whammy of this particular spending spree is its use as a form of tax avoidance. The executive often gets paid in forms of capital income that are taxed at a lower rate than ordinary income.
Bank executive bonuses can and should make us angry, but they shouldn’t distract us. The issue is about more than just ‘greedy bankers’, the issue is a rigged tax system that privileges wealth over work. A dollar received through a paycheck is taxed very differently (and more) than a dollar received through dividend payments, inheriting an estate, or getting a mega-bonus. The money that bank bonuses transfer upward (i.e. the ATM fees, late fees, check fees, services fees, etc. that we pay) is shielded by a tax code that has been twisted by continual lobbying, campaign contributions, and clever lawyering.
In 2011, Minnesotans got as close as we’ve gotten in generations to making the top 1% pay almost as much as the rest of us. This did not go unnoticed. In 2012, the ultra-rich and corporate elite from around the country are going to flood Minnesota with unlimited sums of money to make sure their tax privileges are protected. They will pay for candidates and constitutional amendments that make sure the top 1% are never asked for a nickel more.
Most importantly, this withdrawal of wealth to the hands of a few is coming at a time when we simply can’t afford it. Minnesota is a changing state with a promising future. As the population of Minnesota is getting older and more racially diverse we need to pull together to take on our common challenges.
Massive bank bonuses are missed opportunities. They are student loans not made, start-ups not financed, and houses sitting empty. In fact, that may be the right lesson for this season: it’s time for the top 1% to come back home.
Chris Conry is TakeAction Minnesota’s Economy Program Manager.