The U.K.’s Labour Party surprised the world and maybe itself by taking a tough line on City bank bonuses on Wednesday, according to the press, announcing a 50 percent surtax on banks’ bonus payrolls through next April.

The tax, which the banks themselves would pay, would come in addition to the national and other taxes paid by the workers themselves, already set to rise to 51 percent next year.

Headlines took the bonus sin tax as a bold fait accompli. If so, the tax would be great for New York, at least in the short term.

Banks wanting to cut their payroll could encourage American expats — already annoyed that their kids have developed funny accents, anyway — to move home. British banks like Barclays could move more top people to Lehman Brothers, whose U.S. investment bank assets its purchased last year.

Not so fast, though. Britain still knows that a unilateral punitive tax would be premeditated murder for its financial industry. This may be a staged drama, rather than the real thing. 

The British bonus tax would be “effective immediately” — but it requires legislation. That is, the immediacy is retroactive to Wednesday, if that legislation is passed.

And before it passes its legislation, Britain expects the rest of the world to follow, and not just France.

In a joint WSJ op-ed yesterday (Napoleon would not approve), UK PM Gordon Brown and French president Nicolas Sarkozy said, “We agree that a one-off tax in relation to bonuses should be considered a priority, due to the fact that bonuses for 2009 have arisen partly because of government support for the banking system. However, it is clear the action that must be taken must be at a global level.”

And French finance minister Christine Lagarde further said that British and French officials “will see President Obama in Copenhagen on the 17th. We want a level playing field. Maybe we will have at least an informal agreement by the end of the year.”

In other words — if America goes along with the bonus tax, so will Britain and France. If not, nobody will.

This makes a bizarre sort of sense in the bizarre too-big-to-fail banking world in which we live. If one big country enacts this tax, banks can move to another. But if all do it, the banks can’t — because they need the insulation of being headquartered in a “too big to fail” country.

Citigroup and the Royal Bank of Scotland can’t raise debt financing if they move to the Isle of Wight and escape implicit (and explicit) government guarantees. (That’s why the British tax wouldn’t apply to smaller independent hedge funds, which still have this mobility.)

So will Obama — and Congress — go along?

It may be that Brown and Lagarde are already confident that the answer is no, and that they’ll be able to say that they tried hard, but it’s all America’s fault why their own greedy bankers are still getting those big bonuses.

Read more about this here.

Tags:

You may also like

NY leans on a volatile Wall Street

The stock market turmoil of the last week is a reminder of why it's risky, verging on foolhardy, for New York's state government to depend as heavily as it does on high-income households and Wall Street investors. In the current fiscal year, taxes paid by the highest-earning 1 percent of New York taxpayers—including commuters to jobs in the state—are expected to generate 43 percent of personal income tax receipts, which in turn translates into 27 percent of total state taxes. Read More

Our goose is cooked

Wall Street, the goose that laid golden eggs for New York’s public sector for more than 25 years before the Great Recession, is “still working through the fallout from the financial crisis,” as Comptroller Thomas DiNapoli reported earlier this week... Read More

Profits down but bonuses up on Wall Street

Is Wall Street roaring back — as a revenue-generating force for New York’s insatiable state and city governments, that is? You might get that impression from glancing at today’s press release from state Comptroller Thomas DiNapoli... Read More

Dow down = state revenues up?

The prices of some previously high-flying stocks such as Apple recently have been plummeting, and the stock market has just suffered “its worst week of declines in five months,” the Wall Street Journal reports. This is not good news for savers and investors — but it may be causing sighs of relief in some corners of the state Capitol. Read More

Counting the goose’s golden eggs

The Wall Street bonus pool for 2012 expanded by 8 percent, but remains well below the peak levels of a few years ago, according to a release today by state Comptroller Thomas DiNapoli. Read More

Profits down but bonuses up on Wall Street

Is Wall Street roaring back — as a revenue-generating force for New York’s insatiable state and city governments, that is? You might get that impression from glancing at today’s press release from state Comptroller Thomas DiNapoli, which headlines the finding that the average bonus for securities industry employees in New York “grew by 15 percent to $164,530 in 2013, which is the largest average bonus since the 2008 financial crisis, and the third highest on record.” Read More

No Wall Street bailout (of New York) this year

The latest mergers & acquisitions figures are out, and they're not pretty. According to mergermarket, an M&A data watcher, the year's global slowdown is not only continuing but accelerating. New York can hang on to a thread of good news only in that its rate of decline is not accelerating. Read More

The Fed’s escape from NY (someday)

The national housing crisis is over.*** New York should worry. Read More