Pelosi Backs 90-Percent 'Bonus Tax' to 'Protect' Taxpayers From Executives

March 19, 2009 - 7:41 AM
Rep. Charlie Rangel (D-N.Y.), himself under fire for alleged ethics violations, is the author of a House bill that would impose additional, special taxes on those who received bonuses from companies that accepted taxpayer bailouts.
(CNSNews.com) - Rep. Charlie Rangel (D-N.Y.), himself under fire for alleged ethics violations (see story), is the author of a House bill that would impose additional, special taxes on those who received bonuses from companies that accepted taxpayer bailouts.
 
Employees of bailed-out companies who received bonuses after Dec. 31, 2008 – as stipulated in their contracts -- would have 90 percent of the money taxed away under a bill that the House is expected to take up on Thursday.
 
"We figured that the local and state governments would take care of the other 10 percent," the Associated Press quoted Rangel as saying.
 
The bonuses subject to special taxes include "any retention payment, incentive payment, or other bonus" given to employees whose overall income (other than bonuses) exceeds $250,000.
 
While the AIG situation has prompted outrage, members of Congress also are under fire in some quarters for approving the financial bailout plan without restrictions that might have limited such bonuses.
 
Sen. Chris Dodd (D-Conn.) – a top recipient of campaign donations from AIG employees – on Wednesday acknowledged that he agreed to weaken a provision that would have prevented the payout of bonuses such as those received by some AIG employees.
 
The provision restricting bonuses was contained in the economic stimulus package.
 
Dodd said the Obama administration made him do it: “I did not want to make any changes to my original Senate-passed amendment but I did so at the request of Administration officials, who gave us no indication that this was in any way related to AIG.” Dodd insists he was “completely unaware of these AIG bonuses” until last week.
 
Pelosi criticizes ‘poor judgment’ of corporations
 
House Speaker Nancy Pelosi is among the lawmakers who favor a 90-percent tax on bonuses that were paid out -- as called for by employees' contracts.
 
In a statement released Wednesday evening, Pelosi commented on the need to "stabilize the financial system in order to strengthen our economy and create jobs. We must also protect the American taxpayer from executives who would use their companies' second chances as opportunities for private gain," she said.
 
"Because they could not use sound judgment in the use of taxpayer funds, these AIG executives will pay the Treasury in the form of this tax,” Pelosi said. “I urge all my colleagues to vote in favor of this legislation and in favor of recovering taxpayer dollars and protecting Americans from the continued poor judgment of some of America's largest companies."
 
According to Pelosi, the bill to be voted on Thursday would apply a separate income tax rate of 90 percent to bonuses received by individuals from companies which have received at least $5 billion from TARP. That 90-percent rate also would apply to bonuses paid by Fannie Mae and Freddie Mac.
 
How did this happen?
 
Three Republican senators are asking the Senate Banking Committee – chaired by Sen. Chris Dodd -- to subpoena AIG contracts and any other documents related to bonuses and compensation at bailed-out companies.
 
“I want to know exactly what Treasury Secretary [Timothy] Geithner, Fed Chairman [Ben] Bernanke, and former Treasury Secretary [Henry] Paulson knew about these contracts when the government decided to intervene and why they decided it was acceptable to reward bad behavior at the expense of the taxpayers,” said Sen. Jim Bunning (R-Ky.).
 
Sen. David Vitter (R-La.) said the “bonus fiasco” stems from a lack of transparency and accountability. “The public has a right to understand how these bonuses came to be and what the Treasury knew about the contracts prior to the recent press reports since it is their tax dollars that paid for it.”
 
Sen. Jim DeMint said Americans “are fed up with bailouts for failed businesses and don't believe the rhetoric from Washington anymore.”
 
Bunning, Vitter, and DeMint want the following questions answered:


(1) What legal obligations did in fact exist to pay these bonuses;
 
(2) What awareness did then Treasury Secretary Henry Paulson, then President of the Federal Reserve Bank of New York Timothy Geithner, and Federal Reserve Board Chairman Ben Bernanke have of these contracts when any of the government interventions in the company were contemplated; and
 
(3) Why was language inserted into [the stimulus bill] that seems to specifically exempt these AIG bonuses from executive compensation limits?

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