The Administration’s proposed “Responsible Wall Streeter Tax Credit”

The Administration is about to launch a new plan designed both to stimulate the economy and clean up Wall Street at the same time. The “Responsible Wall Streeter Tax Credit” will provide Wall Street executives and traders a credit against their 2008 income taxes in an amount equal to their individual share of responsibility for the nation’s financial collapse.

The Congressional Budget Office estimates overall losses from the collapse to be about $7 trillion but figures only about 10 percent of that sum will be claimed by Wall Streeters seeking the tax credit because of the reluctance of some executives and traders to take responsibility for the financial mess. That would put the cost of the new program at about $700 billion — roughly the amount the federal government is now paying to bailout the Street.

In effect, the plan redirects the bailout money to these honest executives and traders who fess up and take responsibility. It’s a win-win-win. They get to clear their consciences, which is a first step to clearing up their balance sheets. At the same time, they get big tax breaks which will cause them to spend more, and thereby stimulate the economy. And the plan won’t cost taxpayers a dime more than we’re already spending on the bailout, since the bailout money will go to these honest executives and traders.

One potential glitch: Many Wall Street executives and traders don’t pay enough income taxes to take full advantage of the tax credit. Their earnings come in the form of capital gains, taxed at 15 percent, or they’re parked in the Netherlands Antilles and other tax havens. The only way around this is to make the RWSTC fully refundable. That way, executives and traders who don’t pay enough income taxes to get the full benefit of the credit will be able to collect it anyway, in the form of a direct cash subsidy from the federal government.

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About Robert Reich 547 Articles

Robert Reich is the nation's 22nd Secretary of Labor and a professor at the University of California at Berkeley.

He has served as labor secretary in the Clinton administration, as an assistant to the solicitor general in the Ford administration and as head of the Federal Trade Commission's policy planning staff during the Carter administration.

He has written eleven books, including The Work of Nations, which has been translated into 22 languages; the best-sellers The Future of Success and Locked in the Cabinet, and his most recent book, Supercapitalism. His articles have appeared in the New Yorker, Atlantic Monthly, New York Times, Washington Post, and Wall Street Journal. Mr. Reich is co-founding editor of The American Prospect magazine. His weekly commentaries on public radio’s "Marketplace" are heard by nearly five million people.

In 2003, Mr. Reich was awarded the prestigious Vaclev Havel Foundation Prize, by the former Czech president, for his pioneering work in economic and social thought. In 2005, his play, Public Exposure, broke box office records at its world premiere on Cape Cod.

Mr. Reich has been a member of the faculties of Harvard’s John F. Kennedy School of Government and of Brandeis University. He received his B.A. from Dartmouth College, his M.A. from Oxford University, where he was a Rhodes Scholar, and his J.D. from Yale Law School.

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