I hear that President Obama is expected tonight to ask for a special tax on banks. It's to help insure us against the kinds of disasters bankers create when we protect them against failure while they're permitted to screw their customers, their stockholders and the American taxpayers
No no no, a bank tax is the wrong way to go.
Progressive income taxes are the right way to go. With progressive income taxes, America could easily control the greed. There's no point in pissing off your stockholders by taking a $20 million bonus on top of an outrageously high salary if $19.5 million of it will be taxed away anyway.
This thing needs to be positioned as a "greed tax" — which in a substantial majority of cases it would be. (Income averaging, a device that used to be in the tax code years ago, would protect the occasional athlete, inventor or entrepeneur who makes a big hit only once or twice in his or her life.)
The greed tax would be graduated. Tax brackets stay the same as now for up to $250,000 a year. So if your income is under a quarter of a million bucks a year, there's be no impact at all on you. Everything above that gets taxed at a 38 percent tax rate—not a huge boost. Everything above $2 million would get taxed at a 50% tax rate. And so on, up to 90% for the multi-million dollar bonuses ripped from the accounts of bank customers and the earnings that ought to go to bank stockholders.
A significant fringe benefit: The greed tax would go a long, long way toward reducing the national budget deficit, without snipping here and there at little pieces of important Federal programs.
So why are we screwing around just with bank taxes? Or would President Obama even think about a graduated income greed tax? Probably not.
Obama's real problem from a progressive prospective is that he won't really go for the throats of people who are going for his.