Immediate prospects for a 90% tax on bonuses at many US banks may be receding thanks to the intervention of Obama, but the calls for the punitive taxation of high earners have barely begun in the UK.
Last month, the UK budget deficit was 9bn, eight times its level of February 2008. The IMF is predicting that the UK's budget deficit will hit 11% in 2009 , higher than anywhere else in the Western world.
In an attempt to close the gap, the UK government has already committed itself to hiking taxes in 2011. In what will be the first increase in income tax since the 1970s, personal income above 150k will thereafter be taxed at 45%. National insurance contributions for both employees and employers will also rise by 0.5%.
It's questionable whether this will be sufficient. Carl Emmerson, deputy director of the Institute for Fiscal Studies, says the UK government plans to raise 5bn a year from the increases in National Insurance and 1.6bn a year from the increases in higher rate tax. The IMF is predicting an annual budget deficit in excess of 150bn.
Taxation isn't the only route out. The Bank of England can monetize some of the debt through quantitative easing; the discrepancy will also narrow if the economy recovers and the tax take rises. But if the downturn lasts longer than expected and the tax take recovers more slowly (past losses mean Merrill may not pay UK corporation tax for 60 years), further increases in income tax are a certainty.
City workers will be the inevitable target. A new political consensus is emerging around the need to extract cash from the 'greedy bankers' perceived as responsible for the crisis. The Conservatives are already proposing to follow Labour and increase the top rate of tax to 45%;
How high might income taxes go in the long term? Emmerson points out that dramatic increases in the higher rate are self-defeating as they tend to encourage early retirement and emigration. But as the House of Representatives has shown, populism is not necessarily rational. 40% may soon come to look very generous indeed.