The House is scheduled to vote today on a bill that would levy a 90 percent tax on bonuses paid to employees with family incomes above $250,000 at companies that have received at least $5 billion in government bailout money.Funny, but no one in the House leadership is clamoring for the House to slam Rangel for his tax evasion or ethics troubles. The Senate had no problem confirming tax cheat Tim Geithner to head up the very Department that oversees the IRS - Treasury.
"We figured that the local and state governments would take care of the other 10 percent," said Rep. Charles Rangel of New York, chairman of the tax-writing House Ways and Means Committee.
Rangel said the bill would apply to mortgage giants Fannie Mae and Freddie Mac, among others, while excluding community banks and other smaller companies that have received less bailout money.
House Democratic leaders unveiled the bill as the head of embattled American International Group Inc., which has received $182 billion in bailout money, testified about $165 million in bonuses paid out in the past week to about 400 employees in its Financial Products unit.
And yet, here we are with tax cheats demanding that those who are entitled to their compensation get taxed on such compensation at rates not seen since the 1950s.
What is all the more galling is that none of this would have been necessary had the necessary safeguards been put in place when the bailout packages were first announced. Instead, Democrat Chris Dodd of Connecticut stripped out those provisions in favor of language strictly protecting such compensation packages and lied about his role in doing so.
The Democrats own this mess and their outrage over the compensation packages is itself outrageous because the government ended up rewarding companies for failure with massive amounts of money to prop up businesses that made bad business decisions. If rewarding failure of executives is bad, how does spending 100 times that amount on the very companies that made those decisions make things any better? It does not.
Also keep in mind that AIG CEO Edward Liddy was chosen to clean up the mess at AIG and can say what he wants about trying to get his people to voluntarily give up their executive compensation packages.
What is truly galling is that the Democrats in Congress, along with the President, are trying to stoke populist anger against AIG and other corporations, all while skirting the truth that it was Congress itself that was responsible for this mess - the bailouts along with the allowances for executive compensation. If there is anger, it should be directed at the President and Congress, both of which knew that this executive compensation was to be paid.
Now, Congress and the President are rushing to try and fix their own mess by imposing the confiscatory taxes - with the charge led by tax cheats Rangel and Geithner. Classy.
Tigerhawk makes the point about CEO Liddy more than I did above. Simply put, Liddy was brought in to clean up the mess, and yet he's the one that Congress is raking over the coals and demanding mea culpas from. An Instapundit reader also weighs in on the Congressional hearings yesterday and finds them wanting.
Obama blames Congress for not informing him of the bonus provision (once again clearly showing that Obama did not read the porkfest before signing the monstrosity into law), but Rep. Chris Dodd (D-AIG) says that he inserted the bonus provision into the porkfest at the behest of the Administration.
Senate Banking Committee Chairman Christopher Dodd said the Obama administration asked him to insert a provision in last month’s $787 billion economic- stimulus legislation that had the effect of authorizing American International Group Inc.’s bonuses.That part about him saying he didn't realize the ramifications to AIG employees is nonsense. Of course he knew what these packages are and what was inserted. If he didn't it shows his incompetence to lead the Banking Committee.
Dodd, a Connecticut Democrat, said yesterday he agreed to modify restrictions on executive pay at companies receiving taxpayer assistance to exempt bonuses already agreed upon in contracts. He said he did so without realizing the change would benefit AIG, whose recent $165 million payment to employees has sparked a public furor.
The Washington Post reports that the Fed sat on the knowledge of who was receiving bonuses, but didn't inform the President. Well, that falls on both Geithner and President Obama who has failed to fill the hundreds of positions at Treasury to help Geithner administer the organization during the current economic crisis.
This is the gang that can't shoot straight, but they sure know how to tax everyone all while avoiding those taxes themselves.
Michelle Malkin links. Thanks!
Here's the text of Rangel's legislation. The bill's effective date means that payments received prior to December 31, 2008 are not affected, but any such qualifying payments made between January 1 and the date of passage would be hit with the 90% tax. This is needlessly complicated, and everyone would have been better served had the original TARP legislation been read through by the members and Dodd prevented from inserting the critical text allowing the bonuses to go forward with the blessing of Congress and the Administration via the Fed.
Qualified compensation that will get whacked at the 90% level is defined as "TARP bonus." That means any individual for any taxable year, the receiving the lesser of the aggregate disqualified bonus payments received from covered TARP recipients during such taxable year, or the excess of-- the adjusted gross income of the taxpayer for such taxable year, over $250,000 ($125,000 in the case of a married individual filing a separate return).
TARP recipients are any person who receives after December 31, 2007, capital infusions under the Emergency Economic Stabilization Act of 2008 which, in the aggregate, exceed $5 billion, Freddie Mac and Fannie Mae, and any person who is a member of the same affiliated group or partnership who received the $5 billion in TARP funds.
Of course, lost in all this is the fact that the Treasury hasn't been able to track who got all that money, but there are hints of the large number of banks that would get hammered by it. It is probably one of the reasons that so many bank CEOs are rushing to get out of TARP - so as to avoid getting whacked by Congress wielding the confiscatory tax stick. They don't want to see their own compensation packages go up in smoke, because the government has decided to declare war on the banking industry.
Make no bones about this. The government is declaring war on the bankers with this move, which is unprecedented in history. They are singling out a single class of people who were lawfully entitled to compensation under their employment contracts and engaging in a massive tax grab all while ignoring the fact that their own members voted to allow precisely this kind of compensation package when first considering TARP.
This will further destabilize the markets and the banking system, and it will do little to encourage lending or for people to work with the government going forward since the government has shown that it can and will change the terms at will - without regard for the economic or social damage done.