by James Oliphant
Working furiously to respond to public outrage over Wall Street excess, the House of Representatives Thursday passed a bill that seeks to recoup the lion's share of the $165 million in bonuses paid to executives of American International Group.
But lawmakers were having a difficult time keeping pace with news that promised more headaches for Congress and the Obama administration. One House member said Thursday that 13 financial firms that received an injection of government money owe more than $220 million in unpaid taxes. And reports surfaced that beleaguered mortgage giant Fannie Mae was set to pay millions in retention bonuses--the very sort of payouts that has fueled condemnation of AIG all this week.
The House measure, hurriedly drawn up at the orders of Democratic leadership, would impose a 90 percent tax on those who were paid bonuses at AIG and other firms if they received more than $5 billion in federal bailout funds.
The Senate is preparing a separate, similar measure that would levy a 35 percent excise tax on executive bonuses. Both the company and the recipient of the bonuses would pay the tax. The Senate could take up the measure next week, or perhaps attempt to reconcile it with the House tax bill.
The House bill, sponsored by Rep. Charles Rangel (D-N.Y.), passed by more than a two-thirds majority, 328 to 93, garnering significant Republican support. But it did not come without a bitter debate, with conservative Republicans angrily denouncing the measure as a political charade intended to deflect blame from Democrats about how the AIG bonuses were permitted to be paid in the first place.
The vote came amid an embarrassing flap for Senate Democrats, who disclosed Wednesday that they allowed Treasury officials to scale back language in the economic stimulus bill that sought to limit large executive bonuses such as the ones paid out by AIG.
"This bill is nothing more for everybody to cover their butt up here on Capitol Hill," said Rep. John Boehner (R-Ohio), the House Republican leader. Opponents advocated a separate plan that would require the Treasury Department to seek repayment of the funds immediately. And some suggested the bill was an unconstitutional attempt to penalize a specific company.
But supporters said the bill was the most effective means for the government to seek redress of the bonus money--and that Republicans were attempting to leverage the issue politically.
"This vote is the difference between solving the problem or continuing the problem," said Rep. Steve Israel (D-N.Y.). "The only way to get their money back is to tax it back."
Some Republicans agreed. "At the end of the day, this insult to taxpayers can not, should not, and will not stand," said Rep. Dave Camp of Michigan.
The House debate came as reports surfaced that Fannie Mae is intending to pay four key executives retention bonuses that range from $470,000 to $611,000. The secondary mortgage lender has received billions in government capital to keep it solvent.
The office of Rep. Barney Frank (D-Mass), chairman of the Financial Services Committee in the House, said Thursday that Frank planned to ask that the bonuses go unpaid.
And at a hearing early Thursday, Rep. John Lewis (D-Ga.) announced that a House subcommittee probe had revealed that 13 firms that received federal assistance owe more than $220 million in unpaid taxes. Firms that participated in the government bailout program were required last fall to certify that they did not owe back taxes.
"Are they signing contracts knowing that they are owed taxes but thinking they will not get caught?," Lewis said at the hearing. "This is shameful. It is a disgrace. The American people are fed up, and they are fired up. And they are not going to take it any more.
The Internal Revenue Service released a statement Thursday afternoon, saying it expected the taxes would be paid.
"The IRS has every expectation that these amounts will be paid and is committed to collect every dollar of taxes that are owed. The IRS recognizes that those entities that receive taxpayer support have a special obligation to pay their taxes, and these taxpayer accounts will remain closely monitored by the IRS to ensure that the full amount of taxes due are paid," the agency said.
Comments
The storyline emerging from Wingnut-land and throughout the Repuglican loving corporate media is that Chris Dodd and the Treasury Department secretly inserted a provision into the stimulus bill that allowed AIG to pay its failure bonuses.
There's only one problem with this narrative: it's completely false.
With or without the stimulus bill, AIG would have been allowed to pay its failure bonuses. In fact, at no point in time was there every a law barring the bonuses.
Given that the bonuses were never illegal, there was never any need to create a new loophole to allow them. They were allowed all along.
What actually happened was that the stimulus bill put new restrictions on bonuses, but only applied those restrictions on bonuses that were given out after the legislation passed.
Early drafts of those new restrictions were retroactive, and would have applied to the AIG failure bonuses, but by the time the final legislation was passed, the retroactive provisions had been eliminated. Chris Dodd, who wrote the restrictions, says he agreed to limit their scope at the request of Treasury.
Figuring out why the new restrictions didn't go far enough is a valuable exercise, but it's also important to get the basic story right, and so far, far too many people are getting the simplest of facts wrong.
Before the Repuglicans go wagging their finger in outrage, they ought to at least get their story straight. There was no "secret provision" to allow AIG bonuses.
Posted by: Lars | March 19, 2009 4:42 PM
Boss Limbaugh is short circuiting the GOPer's "brains"
What happens when you're supposedly anti-tax, anti-government waste, pro-business and dead set on opposing all things Democratic, but you've also sworn fealty to a freelancing radio yukster with a big audience, but zero responsibility?
You end up saying dumb crap like this:
.
"The 165 million in bonuses AIG recently made must be recaptured. As the primary, unwilling investors, the American taxpayers deserve to know how and when they will be repaid, and given assurance that their dollars will not be squandered any further. The legislation voted on today will not recapture 100% of taxpayers' money, and it sets a dangerous precedent for punishing individuals by taxing past behavior deemed inappropriate."
>>Rep. Lynn Jenkins (Republican-KS-02)
.
The Republican brain can't handle this, obviously. It's an unfortunate mental malfunction for Congresswoman Jenkins that she opted to try to shoehorn both arguments -- obviously contradictory arguments -- into one speech. But it's indicative of the short-circuiting of the Republican mind. You can't reconcile being anti-Obama, anti-Democrat, anti-bailout, pro-business, anti-tax and pro-Limbaugh and still make an f-ing lick of sense.
Thankfully for Republicans, they don't actually give a crap about stuff like that.
Which is the only way Republicans could possibly justify voting against a 90% tax because they claim they wanted a 100% tax. Mark it on your calendar.
In the end, the bill actually did pass, 328-93! There was an absolutely hilarious scramble to change votes manually at the end of the allotted time, and Republicans split down the middle, 85 for, 87 against. GOP in disarray! And the C-SPAN callers go wild! First one on says, "Impeach the Congress! Class action suit on behalf of the American people!" Hahahahahaha!
Posted by: Kenn Shawl | March 19, 2009 4:52 PM
OK, I stand corrected.
This one really has legs.
In the House right now, some pretty articulate 5 minute speeches are being given by the back benchers in the Replican side of the House.
LaTourette has a rather hokey "mystery" scavenger hunt motif to tie them together, which is neither here nor there.
But he will get the the bottom of it:
The guilty party or parties who put that hooker into the bill will be outed.
Obama's promises of transparency etc. will be tarnished.
Obama will be made to appear acquiescent in the fun 'n games of the Masters of the Universe and their cup bearer, Timmy.
I'd better get out my reference books on Greek mythology. I've a feeling it is going to come in handy before this "mystery" is solved by the Replicans.
Posted by: ornery | March 19, 2009 4:53 PM
This is only going to tax bonuses on those with incomes/salaries over $250,000. It leaves out all those that agreed or agree to $1 salary. They left it wide open for it to happen again with even bigger bonuses!
Posted by: Gene | March 19, 2009 4:59 PM
How about any Private body that takes 1 cent from Congress will be taxed at 90% of their income, apart from bonuses.
The big deal here is how "A" group of Politicians/Congress are playing on the fears of the people, when those fears were created by Congress.
If these Politicians go after one group (covering up their mess), then you tell me how that might not happen to you?
These Politicians think that Govt' is a business and it's their business. Their spending our money as if it's just another branch office.
They need to be stopped. Contact them. House and Senate.
Posted by: PG | March 19, 2009 5:00 PM
This issue just split the GOP clean in halves!
Far from damaging Obama or the democrats in Congress, this issue ended up driving a sharp wedge right down through the ribcage of the GOP.
Well played right wing nutjobs! You have just commited mass suicide by self immolation.
Posted by: Hulk SMASH! | March 19, 2009 5:00 PM
Has anyone who voted for this ever heard of the prohibition on bills of attainder? How about ex post facto laws? No? How about the Equal Protection Clause of the 14th Amendment? You just violated all three of these Constitutional principles with this bill.
Posted by: Vast Right Wing Conspirator | March 19, 2009 5:11 PM
Taxes are not punishment, we're merely recovering money that was taken from taxpayers.
Were we to imprison or fine the bonus recipients in addition to recovering the ill gotten gains, then it would be punishment.
This is nothing new from the Party of Limbaugh..
The GOP said that Democrats were treasonous for hoping Bush failed in Iraq, then say they hope Obama fails fixing the economy.
The GOP says that Democrats think Obama is a Messiah, yet diefy St. Ronald Reagan.
The GOP tries to tell us that cutting taxes will always result in increased revenues.
The GOP named a missle "Peacekeeper.".....enough said.
Posted by: Inconvenient Facts | March 19, 2009 5:24 PM
GOP Votes Against HR 1586 - TARP Bonus Tax - More than 1/2 of the House GOPers just said "NO".
It passed anyway.
The bill to impose an additional tax on bonuses received from certain TARP recipients just passed by the House.
.
87 Republicans voted against it.
85 Republicans voted for it.
243 Democrats voted for it.
6 Democrats voted against it.
So...when it came to correcting the "wrong"- only half of the GOP could muster themselves to vote 'aye'. And their boss, Big Boss Limbaugh, is on the air saying 'so what' to the AIG bonuses.?....ha ha ha!
Posted by: Drill, Baby, Drill | March 19, 2009 5:39 PM
As a Democrat, I say "Go Rush Go!"
Michael Steele, Governors Palin and Jindal, Rep Boner and Sen. McConnell, DON'T LISTEN TO THE POLLS! It's the librul media! The public LOVES you! Don't stop doing what you're doing! 6 months, a year, two years from now, the Villager corporate media will declare your strategy as BRILLIANT!
Posted by: Zappo Dave | March 19, 2009 6:42 PM
All hands on deck.
Jeff Sessions is in the middle of a stemwinder on the real beneficiaries of the AIG bailout.
Goldman Sachs $13 billion.
And the "5 month cover up" of their identities.
"This needless coverup is on reason Americans are getting angrier as they wonder if Washington is lying to them about these bailouts...."
I'm no fan of Sen. Sessions.
But I'm not so dumb not to recognize he has hit up the issue that is going to cause the WH no end of grief.
Posted by: ornery | March 19, 2009 6:48 PM
Lars: you are mostly correct, but you are dead wrong when you say that the bonuses are legal. First off, they are not bonuses, they are salery. Why else would they be contractualy obliged to paying them? Also, why are the "bonuses" sometimes 10 times of what their "salery" is? No one is asking any questions here, and everyone his struggling with what to call these demonic devices. They are illegal forms of salery. They get run through the execs life insurance policy and are thus technically a "benefit" and thus do not get taxed as salery. Then the execs pull the money out of their life insurance policy and they just stiffed uncle sam. It is one of the largest tax loopholes out there.
Because of all of the explanation above, this refutes Gene's point, as income is still income and gets taxed as such.
I get nausious when I hear everyone keep calling these things "bonuses"....they are far from it. Do your homework folks.....something smells like a pug arse on this whole thing.
Posted by: Xcellentform | March 19, 2009 7:13 PM
Dodd Amendment never existed???
.
http://www.cnn.com/2009/POLITICS/03/17/aig.bonuses.congress/
.
http://www.foxbusiness.com/story/markets/industries/finance/dodd-cracks-aig---time/
.
http://online.wsj.com/article/SB123741741674677723.html
.
Your right, never existed.
Posted by: Terry | March 19, 2009 10:08 PM