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May 11, 2010

Filed under: Updates — gioia @ 5:34 pm

 

     LETTER FROM THE EXCELLENT State Sen.RUTH HASSELL-THOMPSON TO HER COLLEAGUES…Tuesday, May 11, 2010

 

 

Dear Colleagues:

I am sending this letter to inform you of my intention to submit legislation to help address the state’s revenue needs in order to mitigate cuts to critical programs and services on which our communities rely, to protect against dramatic layoffs that would result in weaken an already struggling economy, and to extend a measure of property tax relief to struggling homeowners.  I am asking you to join with me as a co-sponsor in submitting this legislation and in supporting these revenues as part of any proposed or enacted budget legislation. 

The bill I am proposing would enact a temporary tax on bonuses awarded in New York’s financial sector.  The financial sector went through a time of significant difficulties and New Yorkers and all Americans helped them in their time of need. Thanks to literally trillions of dollars in taxpayer support, Wall Street has rebounded and in 2009 recorded record profits of nearly $61 billion.  As a result, financial services firms are awarding their employees bonuses that significantly exceed those awarded in recent years. 

As we are all painfully aware the State of New York continues to face serious budget shortfalls because of the economic recession that was brought on in large measure by the recklessness of Wall Street’s actions. Now we need Wall Street to do its part for the rest of us—for our school children, our seniors, our homeowners, our communities and all New Yorkers.  This legislation takes a fair and reasonable approach to revenues and will generate $3.5 billion to $4 billion in revenues this fiscal year by applying a payroll tax to firms on the value of bonuses being awarded to those employees who earn over $250,000 a year.  It is modeled after legislation that was enacted this year in London, England which produced revenues in excess of estimates and resulted in no negative economic impacts. Here is how it works:

  • The Windfall Bonus Recapture Tax would apply to both cash bonuses and to stock options and other deferred awards within the financial services sector.
  • The Office of the State Comptroller estimates that $20.3 billion or more has been paid in cash bonuses in New York City security industry firms since December 2009.  (The actual amount of bonuses may be greater, but I prefer using the more conservative figure.  This figure does not include other sectors of the financial industry or the rest of the state).
  • The tax would be a payroll tax applied at the institutional level and would be paid by the firms awarding the bonus.  Bonuses in the form of stock options or other forms of deferred compensation would be subject to the same tax at whatever time they are actually paid out.
  • The bonus tax would be retroactive to December 1, 2009, would be temporary and would be phased out as of December 31, 2011.
  • The tax would apply to the bonuses awarded to financial sector employees who earn at least $250,000 in total compensation.  The bonus, whether cash or deferred, would be taxed at a rate of 27% which is expected to produce $7 billion over the two year period during which the tax would be in effect.  This tax is not an income tax paid by the employee, it is a payroll tax paid by the employer.
  • The revenue projections are based on an estimate that 75% of bonus recipients fall within the necessary income range to have the payroll tax applied to their bonus; again this is a conservative estimate. 

I will be working with the Legislative Bill Drafting Commission to draft the necessary legislative language and am looking for your commitment to co-sponsor this legislation and to support the incorporation of such language in any budget that is introduced or enacted.  Without additional revenues in the range of $3.5 to $4 billion this year, we will be faced with devastating cuts to vital services and dramatic layoffs statewide.  Please let me know if you have any questions about the particulars of this proposal.

If you wish to commit that you would co-sponsor this legislation and would support the Windfall Bonus Recapture Tax as part of a budget bill, please add your signature in the space provided below.

Thank you for your consideration of this request.

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WE IN THE TAX REFORM MOVEMENT WILL BE LOOKING CLOSELY AT THESE SIGNATURES!

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