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Friday, March 20, 2009

Taking Care of Business: House Passes 90% Tax on Bailout Bonuses

The House passed legislation yesterday to tax at 90% bonuses paid out by companies (AIG) receiving federal bailout money. (Details: applies only to employees making more then $250K at companies receiving more than $5B.) Our gal Stephanie Herseth Sandlin voted aye. House GOP leader John Boehner tried to lead a charge against the measure, saying it's just an effort to cover up past mistakes.

O.K., so by similar logic, on 9/12, Democrats should have blocked President Bush from waging war on the Taliban, since that was just an effort to cover up past mistakes in intelligence and foreign policy, right?

Wrong. Whatever the screw-ups that led to AIG being able to dish out bonuses for failure on the taxpayers' dime, we need to fix the problem. Sending the IRS out to recoup those bonuses is a reasonable and perfectly legal (not to mention vaguely familiar-sounding) method of doing that. And Rep. Boehner's complaint is one more sign that the GOP is all about blame and points-scoring rather than taking care of business.

9 comments:

  1. Unfortunately, it may not be perfectly legal.

    What the bill may do is preclude future bad acts, lousy management and rotten governance. (That is, until the word butchers and lobbyists draft future "exceptions".)

    Two constitutional clauses make this bill suspect as applied to AIG. The most egregious is "ex-post-facto" or after-the-fact provisions are not allowed. The bonuses were paid under one set of tax rules and now trying to apply a new tax rule to an old transaction is ex-post-facto.

    The second is that bills of attainder are unconstitutional. Bills of attainder specifically set one or a group or a class up for punishment. Thus if the bill applies to all bonuses, it may survive constitutional muster. Recall that in US history that some tax brackets were as high as 90%, so if other provisions of the bill are not too narrowly drawn then it may pass this hurdle.

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  2. Couldn't AIG employees ask for deferred compensation on those bonuses? In other words, don't accept the money this year, but defer it to a future year.

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  3. So, I guess Senator Dodd is clear of any wrongdoing in your eyes Cory? Let me see, I believe he is a Democrat, correct? Legally, bonuses are unable to be deferred, but who knows with this bunch. Will have to have the lawyers read the fine print to see what options are available or can be made available with a little tweaking. I'm sure the way Dodd placed the language in there was George W. Bush's fault in some way or other. Probably, by the seven degrees of Kevin Bacon.

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  4. The most frustrating part of this whole thing to me it this... CONGRESS OWNS THE COMPANY!

    If they don't like what the CEO is doing why didn't they just show up to the share holders meeting, so no to the bonuses, fire everybody, and start over. That's what you can do when you own 80% of the shares.

    Congress is throwing rocks at the window of their own house.

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  5. Thank you, Anon 8:56, for further making my point. Dodd's culpability for the problem is a silly reason to vote against a solution to the problem. If you crash my ship into an iceberg, we'll have words when we get back to port; but for the moment, grab a bucket!

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  6. Pennypincher3/21/2009 7:20 PM

    TAX THEM! Those people's bonuses are MORE than most people make in a life time!

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  7. I believe Anon 10:51, sadly, is correct in what he posts.  The Supreme Court,unfortunately, probably will not rule against a blantly unconstituional tax law, but that is certainly nothing to rejoice over since since laws like this have long term unintended consequences.I do disagree that the bill may preclude future bad acts.  Money knows no national boundarys.  Lawyers will always find ways to beat laws, that is their job.If Congress, after careful consideration, passed the bill, If the Treasury and Justice Departments OKed the bill and the President, after four days of consideration, signed the bill, then what is the probem.The reaction in Washington, is a reaction to mob rule(polls and demostrations)fueled by a fear of lost elections.The founding fathers had a reason that US Senators were not to be elected by the people but by state legislatures and the present situation highlites that reason, mob rule.Our national leadership is just a bunch of hypocrites. Our President is being served by lesser men.Joseph G Thompson

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  8. So I heard this morning that this law will be extended to all CEO's and execs, not just those covered by businesses that were bailed out. This is truly scary that the gov't can come into someone's business and say what that business and cannot pay its employees. It is WRONG! But it is just to the socialists' liking, isn't it?

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  9. Where'd you hear that, Anon? I'd like to read up on who's proposing that extension and why.

    By the way, were the 90%+ tax rates during World War II socialism? Those rates lasted through the 1950s... when the U.S. enjoyed remarkable economic prosperity. Hmmm....

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