By a vote of 328-93, the House of Representatives voted to tax the AIG bonuses totally $165 Million by 90%. It was nothing short of a two-ring circus in the House as the Republicans held dominated one ring and the Democrats the other. Finally, due to the majority of votes being held by Democrats, Republicans migrated onto the Democratic side of the isle.
No one is happy about the bonuses. Outrage has run like a bull on Wall Street. Once announced over the weekend, lawmakers saw the opportunity to gain favor with their constituents. The 90% tax was envisioned. Today it passed the House. It will be interesting to see what the Senate does.
The bonuses, totaling $165 million, were paid to employees of troubled insurer AIG over the weekend, including to traders in the unit that nearly brought about the company’s collapse.
The wide margin of victory came despite sharp Republican attacks calling the legislation a ploy to paper over Obama administration missteps.
Of course, the debate over the bonuses is far from over. The legal standing of the bill should it become law will surely be challenged.
A tax expert said there is plenty of precedent for levying punitive taxes on behavior that lawmakers find objectionable. Robert Willens, a corporate tax lawyer in New York, cited the steep excise taxes levied on money paid to firms to keep them from launching hostile takeover bids, known as “greenmail.”
“You can write very narrowly tailored laws,” Willens said. “And they can do it for bonuses already paid.
Needless to say, the Obama administration is taking heat over the bonus debacle. Word has leaked that it was President Obama’s administration that had asked that the bonus language of the stimulus package be removed, opening the door for AIG bonuses. The administration is denying previous knowledge of the AIG bonuses.
The Republicans are busy pointing fingers whether the Obama team is culpable or not. For some, this misstep marks a crack in the Obama fortress.
In fact, it seems that these difficult times have led us into dark waters, making it clear that no one really knows all the details of anything that is before us on the financial bailout front.
If there is a downside to the newly voted tax on TARP bonuses, it is that it appears that the House put as much thought into the bill as they did when they voted for the TARP. Again, we have seen the House… and will probably see the Senate… run around like out of control children on the school yard. Whether we agree or disagree with AIG bonuses, although I suspect that most of us disagree with those who drove our country to the brink of financial failure receiving anything more than a pink slip, it is frightening to see the Capitol in such disarray. The total knee jerk reaction to the bonuses can only remind us of the days before the TARP was passed.
Even if financial stability returns within a matter of weeks or a few months, it is hard to feel confident with those in Congress. Congress failed to listen when Americans decried the TARP program. Perhaps, that was a lesson learned. But, to see the Capitol members reacting yet again with such rapid fire can only make those of us who look to them for calm stability and direction shudder in our boots.