CQ TODAY ONLINE NEWS
– TAXES
Updated March 19, 2009 – 3:07 p.m.
House Passes Bill to Tax AIG Bonuses
By Phil Mattingly and Richard Rubin, CQ Staff
Despite vehement criticism by Republicans, the House passed legislation Thursday that would slap a 90 percent tax on employee bonuses paid this year by companies receiving substantial federal bailout money.
The bill (
The final vote was 328-93, surpassing the two-thirds majority needed to pass the bill under suspension of the rules, an expedited procedure that bars amendments and limits debate.
In the end, 85 Republicans voted for the bill while 87 voted no. Numerous GOP members changed their votes from “no” to “yes” as the roll call proceeded.
Six Democrats voted “no”: Melissa Bean , Ill.; Larry Kissell , N.C.; Michael E. McMahon , N.Y.; Walt Minnick , Idaho; Harry E. Mitchell , Ariz., and Vic Snyder , Ark.
Later in the evening, Senate Majority Leader Harry Reid , D-Nev., moved to bring up the House-passed bill for a floor vote, but Arizona Republican Jon Kyl objected, saying senators needed time to study the measure and perhaps hold hearings to discuss it.
Democrats spent the morning preparing blast e-mails to the home districts of GOP lawmakers voting against the legislation.
“It would be a gift if [Republicans] voted against it,” a senior Democratic aide said before the vote.
The retention bonuses were paid to executives and other AIG employees who are winding down the company’s Financial Products division. The company has received more than $180 billion in federal money under the 2008 bailout law (PL 110-343) and other federal efforts to prevent a collapse that officials believe would threaten the world financial system.
News of the bonus payments by AIG ignited a public and political firestorm this week that has singed the Obama administration and sent Democrats in Congress scrambling to respond.
“It would be both morally reprehensible and fiscally irresponsible for us to quietly hand over millions to those who have cost this country billions,” said Carolyn B. Maloney , D-N.Y.
Republican leaders were not whipping against the bill, Minority Leader John A. Boehner of Ohio said, but he assailed the measure, as did other GOP members who took the floor to attack Democrats’ handling of the bonus issue.
“It’s nothing more than an effort to cover somebody’s rear end because of the political damage that’s out there,” Boehner said.
Uncertain Senate Outlook
It’s unclear what will happen in the Senate, where Finance Committee Chairman Max Baucus , D-Mont., and ranking member Charles E. Grassley , R-Iowa, are drafting a somewhat different version. That bill was slated to be released later Thursday
Senior Senate Republicans indicated they were cool to the idea of passing such legislation in an expedited fashion, preferring to hold a series of hearings before moving anything to the floor for consideration.
“If legislation is going to be proposed, who all should it apply to? Can it be written in a broad enough fashion to not violate the constitution?” asked Kyl, the minority whip. “Until we have hearings and understand all of this, we’re not going to know what kind of fix to implement.”
Senate Majorityh Whip Richard J. Durbin , D-Ill., said Baucus’s bill – rather than the House measure – is likely to be the base legislation the Senate considers.
“I think we’re all going to rally behind it, but it’s likely to be different from the House bill.”
The Senate leaders said they would call up their bill prior to the spring recess.
House Debate
The House bill applies only to those working for companies that took more than $5 billion in federal aid.
It would not affect bonus recipients with household adjusted gross income below $250,000 ($125,000 for individuals or married people filing separately.)
Executives also could avoid the tax by waiving any right to the bonuses or returning the money by the end of the year.
To avoid constitutional concerns about writing a law that applies retroactively, the new rate would apply only to bonuses received in 2009. There is ample precedent for enactment of tax provisions that apply for an entire year, even if they are not enacted until midway through year.
House Ways and Means member Earl Pomeroy , D-N.D., acknowledged the bill was unlike any tax bill he had ever seen. But he said it was necessary and spoke directly to AIG employees.
“You disgust us,” he said. “By any measure, you are disgraced professional losers. And, by the way, give us our money back.”
Many Republicans opposed the bill, citing the “confiscatory” tax rate and the Constitution’s ban on bills of attainder targeted at a specific person or small group.
“People have to understand that using the tax code for punishment is a horrible, disastrous precedent,” said John Campbell , R-Calif.
Republicans were promoting an alternative that sought to prevent any additional money from going to AIG and require Treasury Secretary Timothy F. Geithner to develop a plan to get all of the bonus money back from its employees.
Geithner has already said he will deduct $165 million from the next $30 billion that AIG is slated to receive. Edward M. Liddy, the government-installed chairman and CEO of AIG, has asked employees to return portions of their bonuses and said that at least some are doing that.
Republicans repeatedly assailed a Democratic decision to remove a similar tax proposal from the economic recovery legislation (PL 111-5) and replace it with language that specifically prevented restrictions on bonuses paid pursuant to contracts signed before Feb. 11.
Christopher J. Dodd , D-Conn., the chairman of the Senate Banking, Housing and Urban Affairs Committee, said Wednesday that he had added the language in question at the request of the administration.
“We’re going to pose a lot of questions today because we need a lot of answers," Boehner said.
The weekly “Boarding Pass” of talking points GOP leaders put together for their members as they head for home echoed that theme.
“The American people deserve to know this whole outrage could have been avoided,” the talking points said.
“The Democrat plan to enact a 90 percent tax on AIG employees is just a cynical attempt to divert attention from the truth that Democrats in Congress and this administration made these bonus payments possible.”
Speaker Nancy Pelosi , D-Calif., insisted Thursday that the House was blameless for the stimulus bill language that protected the controversial AIG bonuses.
“This is Senate-White House language...We are already on record as passing legislation that limited executive compensation,” she said.
Democrat Brad Sherman of California said the restrictions that did survive in the stimulus legislation would make executive compensation restrictions tougher than those in the 2008 bailout bill.
Some Republicans voted for the Democratic bill, though not because they supported the Democrats’ approach.
“We should vote aye on this bill, and the reason we should is because it’s going to stop executives from coming here to take TARP funds from Washington,” said Ed Royce , R-Calif. “It’s going to stop capitalists from turning into quasi-socialists.”
Edward Epstein, Benton Ives, Kathleen Hunter and Bart Jansen constributed to this story.F
First posted March 19, 2009 10:39 a.m.
Comments
We do not want another bill with loop holes that is going to take forever to get our money back. The GOP is not safe on this one just because they voted against TARP. Did any of these representatives read the proposal and have the foresight to add provision indicating no frills/bonuses. Another example of unqualified people holding these positions for to long this should be the beginning of the end of the career politician. Just retrieve our money back now from these crooks already and stop making deals with these failures. Keeping these so called financial institutions afloat honestly cannot be helping us regular folk it is just continuing to line the pockets of the crooks that got us into this mess. Our elected officials appear to be absolutely clueless about what to do of how to do it. They are proficient in saying see I didn't vote for it but could not articulate why at the time. Was it to hard to say last Fall no bonuses for these idiots when the TARP was initially presented? To think this is the brain thrust in charge of running this country (right into the ground). The structure of or government was to provide checks and balances to prevent this type of ignorance. I did not know about the loop hole, I didn't want to vote for it at all, these excuses are no longer going to fly.
We do not want another bill with loop holes that is going to take forever to get our money back. The GOP is not safe on this one just because they voted against TARP. Did any of these representatives read the proposal and have the foresight to add provision indicating no frills/bonuses. Another example of unqualified people holding these positions for to long this should be the beginning of the end of the career politician. Just retrieve our money back now from these crooks already and stop making deals with these failures. Keeping these so called financial institutions afloat honestly cannot be helping us regular folk it is just continuing to line the pockets of the crooks that got us into this mess. Our elected officials appear to be absolutely clueless about what to do of how to do it. They are proficient in saying see I didn't vote for it but could not articulate why at the time. Was it to hard to say last Fall no bonuses for these idiots when the TARP was initially presented? To think this is the brain thrust in charge of running this country (right into the ground). The structure of or government was to provide checks and balances to prevent this type of ignorance. I did not know about the loop hole, I didn't want to vote for it at all, these excuses are no longer going to fly.
why don't the GOP right a project that was wrong in the first place.the reb want to be hard asses on every thing that the demo do. they the demo made a mistake do the right thing tax agi bon.and get the money back if not don't give AIG any more of the tarp money if they don't return the 165 million dollars let them fail i could care less let them go into bank/ or receivership, thewy the big ceo's are the ones who have failed this industry let them pay for it all for money to lined there pockets at the tax payers expense.
This tax is unconstitutional and will not survive court challenges. While wrong, these bonuses are perfectly legal. Those who have passed this tax in the house are merely wasting even more of our time.
A SPECIAL PROSECUTOR MUST BE APPOINTED A.I.G. has long been a national embarrassment. http://pacificgatepost.blogspot.com/2009/03/aig-national-embarrassment.html A Special Prosecutor should be assigned and given wide berth to hunt down the malfeasance.
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