Congress Threatens AIG Execs with Taxes
Congress is threatening to confiscate AIG bonuses by abusing its power to tax:
Senate Democrats vowed Tuesday to all but strip AIG executives of their $165 million in bonuses, as expressions of outrage swelled in Congress over eye-catching extra income for employees of a firm that has received billions in taxpayer bailout funds.
“Recipients of these bonuses will not be able to keep all of their money,” declared Senate Majority Leader Harry Reid, in an unusually strong threat delivered on the Senate floor.
“If you don’t return it on your own we will do it for you,” said Chuck Schumer of New York.
The bonuses were paid legally, part of a program that had been disclosed in advance in filings that American International Group Inc. made with the government.
Senate Democrats threatened to tax the bonuses at up to 91 percent through narrowly written legislation, said Schumer, if AIG does not return the money voluntarily. Republicans have said President Barack Obama should have done more to prevent the executives from accepting the bonuses in the first place.
Senate Finance Committee Chairman Max Baucus asked, “What is the highest excise tax we can impose that will stand up in court? Let’s find out what it is.”
In the House, Reps. Steve Israel, D-N.Y., and Tim Ryan, D-Ohio, introduced a bill that would that would tax at 100 percent bonuses above $100,000 paid by companies that have received federal bailout money. “It boggles my mind how these executives can be so unaware of what the American people are going through,” said Ryan. He called his proposal “a wakeup call that the days of arrogance and greed on Wall Street are coming to an end. We will use any means necessary.”
As outrageous as executives of companies getting taxpayer bailouts getting multi-million bonuses might be (see Andrew Ross Sorkin for a contrarian view), it pales in comparison to Congress using the tax code to punish selected individuals. While not technically a bill of attainder, it’s certainly a private bill of the type the Founders considered “tyranny” when done by George III.
One hopes cooler heads will prevail in the end. That it’s even being considered, however, once again proves the wisdom of Chief Justice Marshall’s statement that “the power to tax involves the power to destroy.” (He was actually quoting back Daniel Webster’s statement in oral arguments that “An unlimited power to tax involves, necessarily, a power to destroy” but Marshall made it famous.)