Speaker of the House Nancy Pelosi has announced that the House of Representatives will be voting on legislation designed to tax the AIG bonuses at a rate of 90% on Thursday.The bill should fly through Congress.
“We must stabilize the financial system in order to strengthen our economy and create jobs. We must also protect the American taxpayer from executives who would use their companies’ second chances as opportunities for private gain. Because they could not use sound judgment in the use of taxpayer funds, these AIG executives will pay the Treasury in the form of this tax. I urge all my colleagues to vote in favor of this legislation and in favor of recovering taxpayer dollars and protecting Americans from the continued poor judgment of some of America’s largest companies,” Pelosi said.
The highlights of the small 5 page bill are that the bill would impose a 90% income tax on bonuses issued after December 31, 2008 to individuals who were/are employed by companies that received $5 billion or more in federal TARP funds. The income tax would only apply to individuals and families that have a total income of over $250,000. Bonuses paid to executives at Fannie Mae and Freddie Mac is also subject to the tax.
This legislation, if passed, would be the first the real attempt to regulate the use of TARP money, and indignant outrage is a position that congress people love to take, so it is a lock that this bill will pass. The intrigue will come in seeing how many Republicans will support this bill along with almost all of the Democratic caucus. AIG should consider themselves lucky because the alternative that the Senate has been kicking around would have taxed both AIG and the bonus recipients.
Democrats are desperate to put this mess behind them, so no one should be shocked if this bill flies through Congress, and lands on Obama’s desk by no later than the beginning of next week. If all sides would not have rushed through a rescue bill with holes big enough to drive a truck through, the American taxpayer would have never ended up in this situation. AIG’s attitude about these bonuses has hopefully killed any chance that they might have had at future bailout funds. We can only hope that this debacle has put the kibosh on all corporate bailouts.