US House Approves Bill To Tax $165 Million In Bonuses Paid To AIG Executives
March 19 2009 - 2:24PM
Dow Jones News
The U.S. House of Representatives handily passed legislation to
slap a 90% tax on bonuses at Wall Street firms that received
federal bailout funds.
It passed on a 328-93 vote, with a substantial assist from
Republicans, although about half of GOP House members opposed
it.
The bill would tax bonuses paid by firms that received more than
$5 billion from the Troubled Asset Relief Program, plus Fannie Mae
(FNM) and Freddie Mac (FRE).
Although broader in its effect, the bill is a response to the
furor over bonuses paid by American International Group (AIG),
which has been squarely in lawmakers' cross-hairs after it emerged
over the weekend the company had paid millions in retention bonuses
to many of the executives that worked in the firms' financial
products division that is the source of the AIG's woes.
"These people are getting away with murder," Ways and Means
Chairman Charles Rangel, D-N.Y., said Thursday during debate on the
House floor. "They're getting paid for the destruction they've
caused to our communities."
Under the plan, the first $250,000 of compensation including any
bonuses earned by executives at the firms would be taxed at normal
federal income tax rates. Any bonus over that amount would be taxed
at a much higher rate of 90%.
The Senate is working on its own plan to try to recoup the
bonuses. Lawmakers there have yet to roll out their legislation,
although according to Sen. Max Baucus, D-Mont., the chairman of the
Finance Committee, a bill will be introduced later Thursday.
The Senate bill is much broader than the House version - taxing
bonuses at any company that received federal assistance, not just
the largest ones. It would tax bonuses at 70%, split evenly between
the company paying the bonus and the employee receiving it.
For its part, the Obama administration said that it was pursuing
all avenues for recouping the money. It said that it would seek to
deduct the $165 million from its most recent $30 billion infusion
to the company.
However, AIG Chief Executive Edward Liddy told a House panel
Wednesday the company doesn't want to necessarily tap the most
recent cash infusion. It needs the cash for capital adequacy
purposes rather than for operating reasons, Liddy said.
Earlier Thursday, the House rejected a Republican alternative
that would have directed the Treasury Secretary to develop a plan
to recover the AIG bonuses. The GOP would have blocked additional
federal aid to AIG until 100% of the $165 million in bonuses was
paid back.
In House floor debate Thursday, Republicans said Congress
shouldn't rush to judgment by passing the tax on bonuses.
"I believe this is a gimmick. I don't think this is going to
become law," said Rep. Devin Nunes, R-Calif. "What we should do
today is calm down, stop this process...and go through this bill to
consider whether this is the right course of action."
Republicans also said the legislation may be unconstitutional.
According to talking points distributed by House GOP conservatives,
the House bill might be a constitutionally prohibited "bill of
attainder," or legislation to punish a specific individual or group
of individuals.
Democrats say the bill is not specifically aimed at AIG but is
intended to prevent further abuses by bailout companies.
-By Martin Vaughan and Corey Boles, Dow Jones Newswires;
202-862-9244; martin.vaughan@dowjones