Congress was entirely consumed this week with trying to punish the AIG executives who received $165 million in bonuses. House Democrats decided a 90% tax would do the trick (90%!). This was a hotly contested proposal. People on both sides of the aisle felt that those executives didn't deserve the money. But there were also strong concerns about the constitutionality of the tax hike. In the end, it was a bad bill that should have been defeated. Unfortunately, it passed 328-93. All but six Democrats voted for it, while the Republicans were evenly split 85-87. Here is a letter I encourage you to read, by Jake DeSantis of AIG...it's extremely worthwhile reading. And, now, the Rep. John Campbell lesson in what's really going on:
Taxing Bonuses
by John Campbell (R-CA)I firmly opposed and voted "no" on HR 1586. Let's first understand exactly what the bill does. It imposes a 90% federal income tax on any bonus paid to any employee of any company that has received over $5 Billion in federal rescue funds. Such companies include, Bank of America, Wells Fargo Bank, Chase Bank, JP Morgan, CitiBank, Morgan Stanley, Merrill Lynch, Wachovia, Washington Mutual, Countrywide, Goldman Sachs, AIG, Fannie Mae, Freddie Mac amongst others. The tax would only apply to people with total joint incomes over $250,000 or single individuals with income of over $125,000. When combined with California Income taxes which now top out at 10.55%, this can be a tax just short of 101% of the income.
Under this law, a bank teller at Wells Fargo could receive a bonus of $1,000 for doing a great job. If that bank teller was married to a physician who made $175,000 and they had some additional investment income, that bank teller would pay a tax of $1,055 on the bonus of $1,000 that they received for doing a good job. This is horrible!
This is not raising revenues, this is punishment. It is a terrible precedent to use the tax laws for punishment. If we go down this road, the government can impose a 100% tax on anyone they don't like, or anyone they believe is paid too much. Employees of other companies, doing the same thing for the same bonus, will not receive this tax. That probably makes it unconstitutional and I hope it does.
I understand the public outrage over these bonuses and I share much of it. But this is not the way to fix it. Sue them to get the money back. But don't do this.
You may or may not realize it, but embezzlement income is taxable today, but at normal rates. So if you steal money, you will not have a tax higher than normal. You may be forced to give the money back because you stole it, but it will not be taxed away from you. This bill makes a bonus from Bank of America a more egregious offense under the tax laws than bank robbery.
All of this was caused because we nationalized companies that are created to make a profit. Throughout time, governments have shown themselves to be particularly inept at such an enterprise. This is another example of why.
Z: Meanwhile...cracks in the armor? They're NOT SURE? But, they PROMISED!
z
13 comments:
I knew all that. This poor guy felt the need to spell it out to his own employer in light of the treatment he received by AIG, Mr. Liddy and all the politicians who used it as a distraction and an ass-covering device. The week everybody was screaming about these bonuses and raking Mr. Liddy over the coals after not bothering to take the time to read the damn bill before signing it, I felt I may have been the only person in the general public who thought they earned and deserved those bonuses. Clearly I was mistaken. If this letter was printed in a newspaper then others must agree and see beyond all the political grandstanding and general incompetence. This is all part of the "plan" for the government to get it's sticky little fingers in everybody's business and everybody's wallet. It was engineered to be a distraction and to instill fear and anger in the general public to drum up support for the administrations agenda.
From John Campbell, in this post:
If we go down this road, the government can impose a 100% tax on anyone they don't like, or anyone they believe is paid too much.
In my view, this BHO administration is exploiting the anger of the people over the AIG bonuses. Let's remember that it is the CONGRESS which didn't provide for the proper oversight in the stimulus bill.
Another problem: the very concept of "too much" is subjective. For somebody living in a tent city, my income is "too much," never mind that I fall about 50% the average income for the area in which I live; I also dwell in a single family home with a lot more square footage than a tent.
The IRS is a very dangerous tool: one is guilty until one proves one's own innocence -- particularly during a tax audit.
The IRS is a very powerful tool as well. Remember Al Capone? Couldn't catch him on criminal charges, but he was put into Alcatraz for tax evasion.
What this Congress is doing via taxation is income redistribution, purely socialistic.
In today's WaPo, we have this lead story. Excerpt:
The administration also will seek to impose uniform standards on all large financial firms, including banks, an unprecedented step that would place significant limits on the scope and risk of their activities.
Stepping well beyond regulating AIG!
Most Americans are nodding their heads in approval because BHO has exploited the people's anger in favor of advancing a leftist agenda.
I would like to point out that the bill has not passed and it is likely to be tabled going into recess, never to be seen again.
This is just a misdirection ploy designed to take everyone's mind off what is really going on.
Strictly a pacifier for Rollo.
I'm with the Congressman on this. I was outraged by the bonuses and I wrote a blog about it that was not real popular, but a 90% tax is insanity. I am against the bailouts altogether If we are going to do it though, we need to get the idiots in government to write better bailout legislation. This is not an attack on Obama, Bush allowed the same type of thing to happen. They give out billions of dollars with no oversight and no strings attached. If they're giving out my money, I don't want a string attached, I want a freakin' rope attached to it, maybe a cable or a heavy duty chain.
Of course this wouldn't have happened if John Galt had actually been producing something of value over the last couple decades in America rather than building a huge c**p pile junk paper with few supporting real assets.
That was virtually the entirety of our so called economic growth.
The ONLY reason we/US/the World are hearing about this now is because a select few at AIG got greedy and tried to double end the profits by 'insuring' what they thought could never lose. And it was discovered there was NO value behind the items being traded.
Investors panicked and tried to close accounts. There were no funds to send them. It happened in company after company, to investor after investor.
So we really should thank the folks at AIG for being so repulsively greedy that they shined a light on the whole scam.
Thanks for posting the link to the AIG exec resignation. Extraordinary words from a beaten man.
Congressional mistreatment of AIG employees is unconscionable. AIG's decline was caused by credit default swaps, which are "mortgage insurance" derivatives, which can be traced back to Fannie and Freddie. We know who protected them, Congressional Democrats, Barney Frank & Chris Dodd and all the rest.
America's government caused this economic crisis and now the Congressional culprits are posturing in public hearings trying to deflect the focus away from them.
At some future time, the house of cards will collapse and the truth will be revealed. Will Connecticut & Massachusetts voters finally kick Dodd & Frank out of office?
Sal's Gal
I have consistently pointed out that our attention to $165 million, less than 1% of the amount of taxpayer money AIG squandered on foreign banks, is no more than a congressional conspiracy to divert our attention away from the real issues: (1) Congresses complicity in the financial market meltdown, (2) efforts hide the fact that some members of congress received financial rewards from these same companies, and (3) a manufactured crisis so that democrats in Washington have an excuse to seize privately owned, publicly traded companies. No one is listening. More at issue here is that if congress had allowed AIG to go into bankruptcy, the solvent portions of that company could have reformed, and the insolvent branches allowed to disappear, which is how capitalism is supposed to work.
If pissed off Americans want to hang someone out to dry, why not begin with members of Congress?
Mustang, add top level officials at the US Treasury. Plus, WH Chief of Staff, Rahm Emanuel, who had a 14 month stint at Freddie Mac and a 3 year tenure with Dresdner Kleinwort Wasserstein from 1999 - 2002. Emanuel was hired as an investment banker, no experience required, just political connections to Chicago's democratic machine. He made $18 million dollars working for Wasserstein before returning to politics. Bruce Wasserstein is a major Dem contributor, btw.
Many major, highly-placed Democratic Party pols are key players in this game. It's a complete toxic asset cesspool. A mess they are demanding the American taxpayers clean up.
Sal's Gal
I am starting to see some cracks in the unity of my liberal friends. They can't believe the absurdity of the congressional programs. Interesting how acorn hired the bus that brought the agitators to AIG homes. All in the local ct. papers.
"The problem with socialism is that you eventually run out of other people's money."** Margaret Thatcher*
CT, welcome to geeeeZ!
THIS is a huge question...I may blog on it soon. "are your liberal friends seeing problems with the administration?"
Mine are.
CT, are you libby pals worried about their own plummeting net worth? Liberalism, in theory, sounds fine to leftists until their own pockets are depleted paying for it in reality.
Sal's Gal
Um, isn't punitive taxing unconstitutional?
THEY rushed this though and Obama signed it into law WITHOUT EVEN READING IT, and now they're shocked?
Ugh.
The AIG issue was deflection for the unmitigated and assaultive POWER GRAB by the Obama Administration of which, now, even some Demorats are wary and beginning to recoil!
BZ
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