WASHINGTON, D.C. – U.S. Sen. Sherrod Brown (D-OH) announced a new bill today that would tax bonuses given to executives at firms that received help from U.S. taxpayers in order to fund loans for small businesses. Brown’s bill would use revenues generated from taxing bonuses at firms who received assistance through the Troubled Asset Relief Program (TARP) to help small businesses expand operations and hire new workers.
“It’s time for Wall Street to return the favor to Main Street,” Brown said. “While big banks have rebounded thanks to the help of American taxpayers, small businesses are still struggling. If a big firm that received taxpayer help is now paying out massive bonuses, they should be able to help American small businesses expand operations and hire new workers. Small business growth will create jobs and get our economy back on track.”
The average executive at Bank of America received a $400,000 bonus one year after the bank took $45 billion from taxpayers through the TARP program. The average worker in Ohio makes just over $41,000 a year.
Last week, insurance giant AIG – which received $182 billion in government assistance – paid out more than $100 million in bonuses to employees. Last year, when news of the company’s bonus plans were unearthed, employees pledged to return $45 million in bonuses. Despite this, the company has recouped less than half of that pledged amount. Investment bank Goldman Sachs – which received $10 billion from the TARP program and $12.9 billion in taxpayer aid through the AIG bailout – reported last week that it would pay out $16 billion in bonuses.
Despite the assistance they have received from taxpayers, many banks receiving TARP funds have cut small business lending. In November, the U.S. Treasury Department reported that the 22 largest financial institutions receiving taxpayer assistance reduced lending by $10.5 billion over the previous six-month period. These same banks reduced small business loans by another $1 billion according to a new report released in December.
Brown’s bill would impose a 50 percent tax on all bonuses – both cash and stock pay-outs – in excess of $25,000 given to executives at firms that received taxpayer-funded assistance through the Emergency Economic Stabilization Act of 2008. The revenues would be used to fund direct loans for small businesses administered by the Small Business Administration (SBA).
Small businesses create more than 64 percent of jobs nationwide, but many are struggling to access credit during the recession. Brown is the author of the Small Business Emergency Loan Relief Act, which would temporarily raise the maximum loan amounts for Small Business Administration (SBA) loan products and waive certain fees. Through the SBA provisions passed in the Recovery Act, more than 2,100 Ohio small businesses have received loans. Brown worked to connect more than 1,000 Ohio small businesses with resources on Recovery Act opportunities through a series of workshops he hosted across the state.
Similar legislation has been introduced in the U.S. House of Representatives by Rep. Peter Welch (D-VT).
“Fifteen months after Wall Street drove our economy off a cliff, the same big banks that survived thanks to taxpayer support have returned to their old ways. Rather than invest in our nation’s economic recovery or shore up their balances, these banks have chosen to reward themselves with excessive bonuses,” Welch said. “By diverting outd bonuses to small business lending, this legislation will support our local economies in a way that Wall Street has failed to.”