AIG BonusTax is unconstitutional
AIG BonusTax is unconstitutional. A bonus should not have been
received, but wrong to change the rules after not implementing TARP
properly.
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JudyAnn
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It isn't unconstitutional. The tax would apply to those bonuses paid in 2009 and the tax burden will fall in 2010. There is simply nothing that makes it unconstitutional.
If it isn't unconstitutional to give tax breaks to certain classes or groups, then the opposite is true - it is constitutional to tax them.
March 23, 2009 12:27 PM | Reply | Permalink
TARP was not implemented properly. A provision for paying out bonuses for companies receiving govt bailout money should have been provided.
It was wrong for AIG to pay out the bonuses and it is wrong for congress to tax the bonus recipients.
It is retroactive and it is unconstitutional.
March 23, 2009 12:35 PM | Reply | Permalink
JudyAnn, this is simply not true - it isn't retroactive and it isn't unconstitutional - the tax applies only to those bonuses paid out in 2009. Now if the bonus recipients choose to defer taxes on bonuses which they earned in 2008, then there is no constutional reason that they cannot be taxed on that deferred payment at the current rate which is set by congress. If the recipients want to claim that the bonuses are retroactive, then they should not have deferred the payment to the following year. Yes, those bonuses were for work done in 2008, but that is the chance you take when you defer payment - the rate could go higher.
It may be perceived as retro and unconstitutional, but it is not. Congress has the right to tax that money.
March 23, 2009 2:17 PM | Reply | Permalink
congress is reacting to anger about these folks receiving bonuses. they are legislating on anger. it is wrong!
March 23, 2009 2:52 PM | Reply | Permalink
Congress is always reactive and reactionary. They're assholes, JudyAnn, what else can we expect from them but this kind of silliness?
March 23, 2009 3:31 PM | Reply | Permalink
The question: Is the bonus tax a Bill of Attainder . If it is a tax that singles out a specific and narrow group that is taxed in order to punish then it is unconstitutional.
Article I, section 9, clause 3 of the United States Constitution forbids bills of attainder.
March 23, 2009 12:35 PM | Reply | Permalink
No, it isn't a bill of attainder. It is an addition to the tax code, just as tax exemptions, credits and itemization are - the tax on capital gains is a case in point.
March 23, 2009 2:04 PM | Reply | Permalink
Bev -
You are missing some points in your analysis. All the tax code provision you sight cover a broad class of tax payer. This bill targets a very narrow class and appears, at least on the surface, to enacted as a way to punish this narrow class there in lies the difference.
Unless it is written to cover all people who receive bonuses, who make above $250K a year the courts may well find it is a bill of attainder. Reality if it passes the Senate and is signed into law, both of which I highly doubt. It will be challenged as unconstitutional in the courts.
March 23, 2009 3:34 PM | Reply | Permalink
How can relief on capital gains taxes be anything but a small class of tax payers and though this seems to be a little known fact, the tax code has all sorts of tax bills written to favour one group or even person over others. Reading bills from congress, you can see that all kinds of little tax favours are tucked into final passages of these bills. So these very people who benefit from these little exemptions and relief thrown into these bills, are now outraged, OUTRAGED, that the congress which did so many favours for them before can now act so "unconstitutionally".
Frankly, I hope they open that can of worms as to what is "constitutional" in the tax code. Maybe people will wake up to the favouritism, the thievery, that these very corporations benefit by, are perhaps, "unconstitutional".
March 23, 2009 4:19 PM | Reply | Permalink
The problem with your analogy is that capital gains tax applies to anyone in America who realizes a capital gain. This AIG tax only applies to people who work for specific companies (and also was passed with the stated intent to penalize those who were party to a group of contracts).
If I were hired to help MS fix it's crappy new OS and signed a retention/deferred compensation agreement, this tax would not apply to me; if hired to help AIG model their risk, the exact same agreement would be taxed at 90%. Good luck with that. It's like saying we're going to tax capital gains from Kraft at an 80% higher rate than Kellogg's.
Fortunately, the Senate isn't going to pass anything. So the house got it's moment in the sun, the hyperventilating masses expressed their angst, and the counterparties buried the news that they just put billions in TARP funds on their books - and millions of that dropped right into the pockets of their own executives. What a lovely week.
March 23, 2009 3:35 PM | Reply | Permalink
Sorry, but there is absolutely nothing "unconstitutional" about this tax on bonuses. Any bank that received TARRP funds and used those funds to for "retention" payouts or "bonuses" will have that bonus, if over 250K taxed at a 98% tax rate.
Now here we have a group of people, who have deliberately deferred paying taxes on income earned in 2008 and have benefited from that tax deferrence for years, suddenly griping at how "unfair" the tax system is to them. Ironic as hell, isn't it? So here's the thing - if you take the chance in deferring taxes on earned income in any one year, then you also have taken the chance that those taxes on that deferred income might be raised or changed.
Do I think that congress is acting stupidly? Well, yes, when doesn't it act stupidly?
March 23, 2009 4:31 PM | Reply | Permalink
But you didn't address the essence of the problem. Identical contracts would be taxed at a different rate based exclusively on the entity doing the contracting. I don't see what principle you are using to assert ownership of the company has any bearing, but in my mind differentiating based on who the corporate investors are makes it even more problematical (the fact it's the government seems irrelevant).
At any rate, you are mounting an defense that this isn't ex-post-facto against an argument that this would constitute a bill of attainder.
March 23, 2009 5:42 PM | Reply | Permalink
What? It isn't a bill of attainder - it attaches no property, nor persons - the agreement to take federal funds is an ispo facto contract. By agreeing to take the money, they've agreed that their is an implied contract between the govt and the borrower. The constitution itself is a contract.
March 23, 2009 7:10 PM | Reply | Permalink
The bonuses weren't (aren't) really bonuses. The bonuses were part of a guaranteed contractual compemnsation package which deferred a lump sum payment until the end of the year. They were, in practical terms, ordinary compensation. They were called bonuses for tax purposes but would never meet the test for what might be termed a bonus. It's a tax avoidance ploy all the way.
March 23, 2009 5:02 PM | Reply | Permalink