While government officials continue tip-toeing toward the fiscal cliff, businesses are quickly building a new type of “golden parachutes” for executives just in case they have to jump off it.
President Obama and Republican House Speaker John Boehner exchanged phone calls and counter-proposals in an attempt to find common ground on a plan to avoid the fiscal cliff that will trigger mandatory spending cuts and tax increases on Jan. 1, but got no closer to a resolution.
Meanwhile, some large corporations decided not to wait and have offered executives “special dividends” bonuses – including $1 billion to Las Vegas Sands Casino leader Sheldon Adelson – before the current tax laws expire.
That pessimistic reaction is common as Obama and Boehner carry on their sparring match over how much is needed in tax hikes and spending cuts to avoid falling off the cliff.
Another Rejection Notice
Boehner talked with Obama by phone Tuesday, responding to the president’s latest offer. Obama’s proposal scales back tax hikes by $200 billion, but the Republicans are more interested in specifics on spending cuts.
“We’re still waiting for the White House to identify what spending cuts the president is willing to make as part of the balanced approach he promised the American people,” Boehner said Tuesday on the House floor. “Where are the spending cuts?”
Boehner did send a proposal back to Obama, but Republicans admitted privately that the speaker’s offer didn’t vary much from the original proposal he made more than a week ago. The response from the White House, which has demanded higher taxes on the top 2 percent of wage earners, was predictable.
“What is required is agreement by Republicans to some specific revenues that includes raising rates on the highest earners,” White House spokesman Jay Carney said. “There is a deal out there that’s possible.”
So despite phone calls and private meetings between top aides, no progress is being made, or at least none is evident.
“I think it’s getting worse, not better,” House GOP Whip Kevin McCarthy, R-Calif., told The Associated Press.
Added Senate Majority Leader Harry Reid, D-Nev.: “I think it’s going to be extremely difficult to get it done before Christmas, but it could be done.”
Even Boehner sounded less than optimistic.
“I was born with a glass half full. I remain the most optimistic person in this town,” he said at a news conference Wednesday. “But we’ve got some serious differences.”
Big Bonuses for Bosses
The stalemate may take a while to settle, but private business isn’t waiting. If no agreement is reached by Jan. 1, the tax rate on dividend income will jump from 15 percent to at least 39.6 percent. Add in the 3.8 percent Affordable Care Act tax – better known as ObamaCare – and tax hikes at the top end could reach 43.4 percent in 2013.
That is why Adelson, and others, are getting their money before Dec. 31. The $1 billion bonus, which the casino executive is getting at the 15 percent tax rate, would be worth just $671.4 million if he had to pay the 43.4 percent rate.
Other executives on the “take it now” plan include Carnival CEO Micky Arison, who will get $47 million at the current rates instead of $31.3 million at the 43.4 percent rate; Oracle founder Larry Ellison ($168.1 million now/$111.2 million later); and Thomas Frist Jr., HCA Holdings ($119 million now/$79 million later).
Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].
- Durgy, E. (2012, December 7). Billionaires’ Big Bonuses Ahead Of The Fiscal Cliff. Forbes. Retrieved from http://www.forbes.com/sites/edwindurgy/2012/12/07/billionaires-big-bonuses-ahead-of-the-fiscal-cliff/
- Montgomery, L., and Kane, P. (2012, December 11). Obama, Boehner trade ‘fiscal cliff’ proposals but appear no closer to a deal. The Washington Post. Retrieved from http://www.washingtonpost.com/politics/gop-leaders-challenge-obama-to-specify-proposed-spending-cuts-to-avert-fiscal-cliff/2012/12/11/5f681616-43ad-11e2-8061-253bccfc7532_story.html
- Taylor, A. (2012, December 12). Fiscal Cliff Talks Appear to be Stalled. U.S. News & World Report. Retrieved from http://www.usnews.com/news/politics/articles/2012/12/12/fiscal-cliff-talks-appear-to-be-stalled