Friday, March 20, 2009

Taxing Bonuses

We are all angry about the AIG bonuses, rightfully so. By offering large bonuses to AIG leadership, we are rewarding gross incompetence. “You utterly destroyed this company. Nice job, here’s your stack of cash.”

What can be done about it now, though? A handful of lawmakers have suggested taxing these bonuses at an enormously high rate. Ok, that will effectively give the money back to the government. But this is using taxes to punish people. And that is not the purpose of taxes.

Taxes are paid to create revenue streams for operating government bodies. The tax code is not an alternative to jail time, nor should it be. This will create a dangerous precedent. What’s next? Drug dealers can avoid prosecution by paying a higher tax rate?

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