I’ve been following the run-up to next week’s G-20 meeting in Pittsburgh rather closely, and am concerned about the nature of the debate thus far. Before the self-congratulating and back-patting begins on the G-20’s “could have been worse” attitude over the current state of the recession – and the prospective recovery – begins, the big issue among the world’s economic leaders seems to be on the issue of bonuses.

Here in the U.S., we’ve certainly witnessed our fair share of anger over the bonus structure currently in place in the finance industry. After last year’s hasty first round of bailouts, and the subsequent fallout over much of that money being used for bonuses, golden parachutes, and other forms of superfluous cash-buttressing, Americans were clearly ready for some decisive reform. Europe, similarly, has called for a change in “bonus culture” since the collapse began in earnest around this time last year.

Still keen on keeping some sense of laissez-faire, the United States and Great Britain have been tepid on the idea of hard and fast bonus regulation, whereas Germany and France have “demanded a tough line,” according to an article in The Economist. The tough thing about this issue is that bonuses can be taxed at higher rates than the baseline salaries of high-earning bankers.

In response to any global policies curtailing bonus culture, the big banks of the world will likely raise salaries to ensure the best talent doesn’t simply set up shop in a country capable of providing bigger bonuses. In any case, the challenge will be to keep tax revenue flowing in from the bigger earners, whether that means a change in the tax code, or simply more aggressively taxing whatever bonuses do get passed out. Needless to say, it will likely be a while before anti-bank sentiment dies down worldwide.

[image via Gregory Warran]