The House has just passed the special bonus tax bill against recipients of government rescue money. What could stop people from gaming the salary for example, increases the base salary of the staff by $166k for 3 months instead of paying 500k year-end bonus? I don't think increase salary is the big problem but would decrease the salary back to normal trigger something in US employment law?

QuoteOriginally posted by: PlasticSaberThe House has just passed the special bonus tax bill against recipients of government rescue money. What could stop people from gaming the salary for example, increases the base salary of the staff by $166k for 3 months instead of paying 500k year-end bonus? I don't think increase salary is the big problem but would decrease the salary back to normal trigger something in US employment law?In theory nothing. I believe that the law may actually be illegal. How can you target the income of a small group of people ?How would this be any different from a law which for example, taxes all gay+lesbian & black & shorter than 5'4'' & rapping Luda songs at 100%?

QuoteOriginally posted by: PlasticSaberThe House has just passed the special bonus tax bill against recipients of government rescue money. What could stop people from gaming the salary for example, increases the base salary of the staff by $166k for 3 months instead of paying 500k year-end bonus? I don't think increase salary is the big problem but would decrease the salary back to normal trigger something in US employment law? thats exactly right. what they call a bonus could be relabled as profit sharing or simple salary. congress is stupid again.

QuoteIn theory nothing. I believe that the law may actually be illegal. How can you target the income of a small group of people ?Well I think you can target the people who work for companies you are giving billions of dollars to rather easily, without much backlash. Not that I agree with that, but popular perception is an important thing.

I have been talking to some Reassuringly Expensive Lawyers (tm) about this, and if makes me feel quite old...In Britain, when I was growing up takes on "unearned income" were 98%. Yes really.Yes, 98%.That persisted until the 1980sThe tax system also tried to be "fair", with breaks for everything from pension contributions, vouchers for lunch (yes, really), through mortgage payments, and the rules on employer provided cars were quite amazingly complex.It became rational for the richest people in Britain (and most European countries) to spend 50% of their income on paying tax accountants who were in some ways the quants of their day. Such was the mess that the union for tax inspectors made serious money selling advertising space in its newsletter as accountancy firms really valued "insiders" to help them beat the system they used to work for.This spawned what PlasticSaber's insightful comment implies. Lawyers, accountants and of course "tax quants". Today there about I guess about 10 such people in the world. Next year I expect that to grow by at least an order of magnitude, and the year after that it may even go up faster.In the olden days, one was paid in an amazingly complex way. Until about 10 years, more than one midscale London bank gave partidges to its staff at Christmas.More mainstream were:Cheap loans, up until the late 1990snearly all banking staff got subsidised mortgages. I expect to see senior executives getting "loans" in the millions.Heavy pension and insurance benefits. In Britain executives pensions are politically sensitive, but as Mrs. Dominic will tell you pensions are complex things. Something can be a pension, but not called a pension.Company cars. These are now pretty rare, though some people who've been at their firm a few years still have a fossil in their pay statement of a "car allowance", until a few years ago any large firm would have staff whose only job was to manage company cars, their fuelling, repair, allocation, etc.My model is that company cars will increase and more will be chauffeur driven vehicles.Expenses....I have a role that involves contact with clients, the press, candidates etc, so there's lunches and scary amounts of coffee.But most bankers have far less. However, one will see more "liberal" atttitudes to expenses as an underhand form of bonus for good performance.This will expand to include those conferences held in attractive places.Charities.A lot of people have causes they support, either through genuine belief or because it gives them social status. Done it myself (full disclosure here). A couple of my god children were not showing the appropriate level of motivation at school, and when told they would not be able to earn a living replied "money doesn't matter". I dealt with this by buying tickets from a charity for a Star Wars Premiere. They were impressed by the hordes of people taking our photo who thought we were in the film, walking the red carpet with Count Doku, Natalie Portman, and a horde of celebs. I made the point that not only were we sitting directly behind the great and the good from SW, but they worked out that we were in better seats than most celebs. The message was "I can afford this shit because I worked at school, but you can go and be one of the crowd if you like".As it happens I paid for this myself, but you can see how execs of banks are going to be seen "supporting the community" more often. Executive jets are also not politically correct, but already there are firms who have fleets of planes who offer a " more responsive and flexible" service. They will be quite happy to brand themselves as "air taxis", or "delivery vehicles" if it means that large firms will move their executives around that way.Credit Suisse has paid some poeple in "toxic debt" in an effort to shaft them. But it is equally easy to give your favourites what looks like a bad deal if you don't know the credit market, but is actually rather sweet.Support staff will be prettier, this is actually a classical result from agency theory, the part of economics that models how executives choose to get their rewards. It also predicts better offices, higher quality in house cartering, and access to an improved corporate wine cellar. And yes of course, some executives really do get to go to French chateaux to select the contents, along with wives and/or secretaries.Some firms give luxurious apartments for senior staff to help them when they "work late" and can't get back home, or when the commute from their real home is too tough for the poor dears. That's going to increase, partly because they can currently be bought cheap.But all this is very inefficient. The best way to give someone $1 of benefit is to give them $1. I have no interest in a flash car, in fact I have never owned one, my wife deals with that stuff, I'd rather have the cash, but in the new (old) world many will get the "benefit" or nothing.

The AIG thing is interesting, not least because some "retention bonuses" were paid to people who had already left One threat I've heard is that AIG management know little about CDS's and the team managing them would not only walk if not paid, but would use their knowledge to speculate directly against AIG.That's a credible threat, especially when you think how big AIG's exposure to credit instruments is known to be. Also the "tax" proposal is going to be difficult to apply, not least because my information is that a good % of the staff are neither US citizens nor based in America.I don't know enough to know how the AIG thing will play out, but I know enough to doubt that anyone knows enough to forecast the outcome, except maybe to say clusterfuck very loudly whilst banging your head hard against your desk.As for suing engineers, most who have this exposure have insurance, so a screwup has more of the effect of raising the premiums for everyone.Many firms have insurance to cover various forms of wrongdoing by traders, but of course AIG is a big insurer, who could possibly cover that, and looking forward who will be selling this sort of insurance ?

I'd like to swap my future bonuses for guaranteed annuities. Anybody know who offers these swaps?

KackToodles - I believe that sometime around 2001, a lot of founders of dot-coms (with a large amount of paper wealth) who had realised that their companies were built on little more than hot air were trying to swap their shareholdings into guaranteed annuities. Alas this never really took off