Congress Considering Sending The IRS After AIG

The Washington Post says that the House will vote this afternoon on a bill that would seek to impose a 90% tax on the AIG bonuses. The Senate Finance Committee is also working on similar legislation, but have not yet scheduled a vote.

From the Washington Post:

The House bill would tax 90 percent of bonus income for individuals with a household income of at least $250,000. Senate Finance Chairman Max Baucus (D-Mont.) said the Senate bill would impose excise taxes of 35 percent each on both AIG employees and the company. Combined with the personal income tax paid by the executives, the Senate levy would capture more than 90 percent of the bonuses.

Separate provisions would target recipients who are foreign nationals. Both the Senate and House taxes would apply broadly to bonuses paid to employees of firms receiving government aid under the $700 billion Troubled Asset Relief Program (TARP), approved last year by Congress to prevent the collapse of the financial sector.

We suppose when all else fails, make the IRS do your dirty work….

House to Consider Tax on AIG Bonuses [WaPo]


Edit Your Comment

  1. Ryan Orman says:

    sounds good to me

    • sleze69 says:

      @Ryan Orman: Isn’t arbitrarily raising a tax in the current year illegal?

      • outinthedark says:

        @sleze69: Sorry anything less than 100% is not ok in my book. It all of our money and I could care less if it is illegal what these jokers did is criminal.

        • enm4r says:

          @outinthedark: It’s unfortunate the populist outrage is blinding people from seeing the larger context. This affects everyone at the company, from the executive who drove it into the ground, to the grunt doing data entry.

          Example, someone works at bank making 50k a year. Does great in his specific sector, doing well and beyond his goals. He gets a $5000 bonus, which is not uncommon. That person’s spouse owns a business, store, whatever, making 200k a year. Now this guy who did everything he was supposed to, was contractually granted a bonus, and you’re going to take 90% of it away. That’s ridiculous.

          This move is completely unwarranted. You can be possed about the bonuses, but the anger is more appropriately directed to our legislators who allowed this to happen in the first place.

      • Necoras says:

        @sleze69: Yes. Even worse, a lot of these bonuses were given out last year. This is imposing an arbitrary tax on earnings which have already been given out. It’s blatantly unconstitutional in so many ways.

    • Traveshamockery says:

      @Ryan Orman: There are a LOT of scary precedents being set by government these days, and this is one of the most frightening.

    • Bulldog9908 says:

      @Ryan Orman: Sounds like the worst idea ever to me.

  2. EarlNowak says:

    Don’t f- with the treasury.

    Everyone forgets they run the most efficient government department in existence. Say what you want about the IRS, they know how to get blood out of a stone.

  3. SpaceBat_GitEmSteveDave says:

    So if these people let AIG break their contracts, can the IRS go after whatever award they get for the contract being broken?

  4. Ninja007 says:

    the congress are a bunch of indian givers

  5. Anonymous says:

    So the government is going to impose new taxes on 10 people becuase it doesn’t like it? Those bonuses were under contract and guaranteed by the stimulus bill. What about the bonuses to people from Freddy and Fannie?

  6. LuzioFantazmic says:

    Talk about a lot of political posturing. Let’s stand up and send the IRS after these dead beats. While I don’t condone what AIG did,We own 80% of them. So wouldn’t this essentially the government sicking the IRS on itself??? This is nothing more than a politician making themselves look tough when they full well know that nothing will ever come of it. But it sounds good to their constituents.

  7. DustoMan says:

    What the hell… it’s congress’ fault that the bonuses got through in the first place. They had their chance to stop it. Why waste even more money on the IRS? The entire congress should be fired.

  8. axiomatic says:

    What a comedy of errors. It’s no longer shocking, just hilariously sad. Hard to believe that AIG and our own Government are so inept at pretty much everything.

    • Traveshamockery says:

      @axiomatic: Yeah, why can’t we go down in a blaze of glory like other cool nations? People are going to smirk when they read this chapter in history books 200 years from now.

  9. durkzilla says:

    Our government is a bunch of jackasses.

  10. hi says:

    Yeah lets send the criminals after the criminals!

  11. ThinkerTDM says:

    I don’t think 90% tax and a tax on 90% are the same thing. Maybe I read it wrong.

  12. PittsburghJen says:

    This is all just shenanigans. It can’t be this disorganized in person, can it? If I were to walk into the Capitol today, would it be as much of a clusterfuck in person as it is when you read about it?

    • ADismalScience says:


      A buddy of mine works for the Dept. of Defense. He was telling me that one of the big budget people there is this lady who spreadsheets all the debit, credits, expenses, etc. Except she’s “old school” and won’t use Excel – they pencil it all onto massive ledgers.

      She. Pencils. It. Onto. Paper. Ledgers. In 2009, at this very moment, inside the single largest taxpayer-expense-producing bureaucracy in America.

  13. Eyebrows McGee (now with double the baby!) says:

    I love the graphic. Rar!

  14. Daniel Kubik says:

    Good plan, shaky law. There’s an argument to be made this constitutes a bill of attainder.

    As Senator Baucus is quoted as saying in the article, I think the best outcome is to use the legislation as leverage to get the bonuses back, rather than try and actually enforce it.

    • EarlNowak says:

      @Daniel Kubik: I don’t buy it. It’s not a punishment specifically focused at a person, but a tax focused on a group- the group of companies receiving TARP money, and the people getting bonuses from those companies. The 16th amendment gives congress broad taxing powers.

      Read it yourself- The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

      Also, I don’t think TARP receivers and those who ran their businesses into the ground are a protected class under the 14th amendment.

    • johnva says:

      @Daniel Kubik: No, I don’t believe it is a bill of attainder. It doesn’t apply only to AIG employees.

  15. Canino says:

    The AIG bonus recipients will have to wait a while. The IRS is busy right now with Obama’s cabinet picks and other appointees.

    • darkryd says:

      @Canino: ..along with every other politician in history.

      Bush’s cabinet picks had the same problems – he just chose to ignore it and let them on his cabinet anyways.

  16. ADismalScience says:

    Capitalism is a 4-step loop:

    Let’s use the economy to solve our government’s problems.

    Let’s use debt to solve our economic problems.

    Let’s use banks to solve our debt problems.

    Let’s use the government to solve our bank problems.

  17. HarbingerTG says:

    There is no such thing as government efficiency

  18. Yokai Monsters Spook Warfare says:

    Question: Is the $250,000 supposed to refer to pre-bonus or post-bonus income? I don’t know the numbers, but of the 73 people who received over $1m in bonuses, I bet the number who were paid over $250,000 in salary is much smaller.

    • PhiTauBill says:

      @StellaBella07: I’m fairly certain the number will include the actual bonus amount. The floor of $250,000 is also “family” income, so this bill is going to take back bonuses from secretaries at TARP banks who received $2,000 bonuses simply due to the fact that they might be married to someone who makes $250,000. Doesn’t seem fair to me… target those that got big bonuses (i.e. $50K or $100K or more)

  19. chapoec says:

    Wow this is a dirty move by congress. Put yourself in the individuals perspectives. If you got a bonus that was promised to you would you give it back. Its not a performance based bonus but a retention bonus. The only reason congress is making a big deal of this is because the media reported this and it makes them look bad. They knew for months that they were going to give bonuses but did nothing about it. Now they are going to use the IRS to do their dirty work. What kind of socialist crap is this.

  20. Anonymous says:

    When Charlie Rangel and the rest of the Democrats start paying their own taxes, only then should they should start raising taxes…

    And I can’t believe how self-righteous Congress is when they missed the entire economic collapse as well! They had the opportunity to regulate credit default swaps and said no! They had the opportunity to regulate Fannie and Freddie and said no! They rode the bubble to the top, and helped inflate it, and now are saying they’re the ones who can fix it! UGH!!!!

  21. couldberunning says:

    They can try all they want. As much as I hate AIG, congress has no grounds to send the IRS after them or demand the money back.

    1. It is “ex post facto” cause they didnt want to read their bill in the first place and prevent this and now there are trying to pull a mulligan.

    2. Bill of attainder is also possible cause they haven’t proven guilt in the court of law. Guilt or Innocence is not up to Congress.

    These are both under Article I of the constitution. If they go this route they are just going to cost us more tax payer money.

    and if they decide that neither of these AIG could also go after them for Breach of Contract. They had an amendment on the stimulus which states an exception for contractually obligated bonus agreed on before Feb 11 09.

    I think the only chance for them to get this money back is to have the attorney general look for fraud in the statements that originally were sent prior to the “bailout.”

    • SynMonger says:

      @couldberunning: Congress makes the law.

      Yep, they screwed up, and guess what, when they try to fix it they screw it up worse. Nothing new there.

      Making up a new tax does not equal declaring them guilty without benefit of a trial. The house version doesn’t specify any group, it would apply to anyone who made over $250,000 and received bonus income.

  22. psionix says:

    The income tax is unconstitutional. The Supreme Court ruled that #16 granted the Congress no new powers of taxation. They didn’t have the authority to tax individuals before the amendment, so they still don’t have that power.

    Also, you have to realize that the pay you get from your job is not INCOME at all–it’s a barter. You trade your time and abilities for cash. Neither party has a net gain as would be the case for, say, a stock you hold appreciating in value.

    • Red_Flag says:

      @psionix: Ummm… no. I think you’re referring to Bowers v. Kerbaugh-Empire Co. (1926), in which the Supreme Court found “It was not the purpose or the effect of that amendment to bring any new subject within the taxing power.” However it continues: “Congress already had the power to tax all incomes. But taxes on incomes from some sources had been held to be “direct taxes” within the meaning of the constitutional requirement as to apportionment. The Amendment relieved from that requirement and obliterated the distinction in that respect between taxes on income that are direct taxes and those that are not, and so put on the same basis all incomes “from whatever source derived”. “Income” has been taken to mean the same thing as used in the Corporation Excise Tax of 1909 (36 Stat. 112), in the Sixteenth Amendment, and in the various revenue acts subsequently passed. After full consideration, this court declared that income may be defined as gain derived from capital, from labor, or from both combined, including profit gained through sale or conversion of capital.”

      See also, Commissioner v. Glenshaw Glass Co. (1955) and Parker v. Commissioner (1984). Or there’s always Wikipedia. []

      Ultimately, the courts have not held the 16th Amendment to be unconstitutional nor have they said that wages are not income. They have held the exact opposite.

  23. PittsburghJen says:

    @ ADismalScience: Wha…? You’re absolutely kidding me – how is this possible in 2009? Why has no one sent her to a “How to Use Excel” community college class? What the eff is going on!?

    Also, the “reply” button is still not working.

  24. thebluepill says:

    In Soviet America, Bonus gets You!

  25. Reid Antonacchio says:

    ex post facto only applies to criminal punshiments

  26. Pylon83 says:

    So long as the law is sufficiently broad, it probably doesn’t pose a Bill of Attainder problem. It seems that’s what they’re doing by applying it to ALL TARP recipients.

    The Ex Post Facto provision only applies to criminal laws, thus it’s inapplicable here.

    To the guy who claims the income tax is unconstitutional: put on your foil hat, the government is listening to your thoughts.

  27. Pylon83 says:

    I meant to provide a cite to my comments above, so here it is


  28. Trai_Dep says:

    Yay, Congress!



    Establish a thriving mixed economy that’s the envy of the world. Keep it expanding, with minor hiccups, for half a century.

    Elect a Conservative, “Free Market” Republican majority in Congress. Elect a Republican President who’s a creation of their basest, most no-nothing core.

    Stew for eight years.

    Let economy self-destruct in orgy of self-dealing, back-scratching and “free market”, no-regulation excess.

    * For chuckles, launch optional, preemptive war for fictitious reasons because we have over $3 Trillion and over 5,000 US lives to burn.

    Turn record-setting budget surpluses to 10x larger deficits than ever held (created by previous GOP Presidents). Create policies that create massive capital balance deficits unheard of in modern history. Watch as value of $US plunges: the Loonie worth more than $1. The Loonie! In the largest, most vibrant consumer-based economy on the globe, make the wages of the lower 90% whither or become stagnant while allowing top 2% increase by a hundred-fold.

    Ensure policies that facilitate ALL debt, allow multiple trillion-dollars-of-wealth destroying bubbles to firmly take hold, then explode. Tie together commercial and investment banking sectors at the hip, then let them engage in “self-regulation”.

    Watch as an entire, crucial financial sector becomes extinct, commercial paper markets freeze. Watch as commercial paper markets freeze!

    In blind panic, let GOP leaders create blank-check, no reform, no-strings-attached trillion-dollar grants from taxpayers to suspender-wearing idiots who created this mess to begin with. Try to get provision that all actions by GOP leaders are beyond Congressional or Judicial review, oversight or transparency.

    Turn over government to responsible leaders now tasked with undoing globe-threatening carnage.

    Bitch about how it takes longer than eight weeks to undo nearly a decade of trillion-dollar waste and malfeasance.

    Obstruct all attempts to put house back in order. Blame “The Government” instead of absurdly implicated, corrupted, false “Free Market” “Self-Regulated” ideology. Find minor lapses on other party members then use to blame said efforts to put out raging inferno that used to be a perfectly functioning, relatively fair, vibrant economy that was the envy of the world.

    Wait ten years. Hope electorate forgets so the cycle can repeat.


  29. discordance says:

    For what it’s worth, every job I’ve ever worked at that featured bonuses (god knows they were never as large as the ones given to AIG, of course) put *heavy* takes on my bonus pay. Fair’s fair, Wall Street.

    • parkavery says:

      @discordance: Oh yeah, bonuses are already taxed out the @$$. My partner gets a “raise” every year but they stick it into their paycheque as a lump sum bonus rather than an hourly increase, so it immediately disappears due to tax. Yay.

      • Pylon83 says:

        “Bonuses” aren’t taxed at a truly higher than ordinary income. More taxes are withheld from the bonus because your withholding throughout the year doesn’t take into account your bonus, thus if the company didn’t withhold from the bonus at a higher rate, your withheld taxes would be lower than they should have been. This is because of our progressive tax structure. If you’re in the 25% tax bracket, that doesn’t mean that you pay 25% of your income in taxes. Your average tax rate is much lower than that. It’s all pretty complicated, but my point is simply that you don’t pay a higher true tax rate on bonus income.

  30. FrankGrimesJr says:

    Can someone please explain how this law would be Constitutional? Or is it just symbolic/grandstanding.

    Isn’t it illegal to pass a law to regulate the past? (e.g. Ex post facto laws prohibited by the 9th amendment)?

  31. FrankGrimesJr says:

    @FrankGrimesJ Oops, sorry. Got my answer.

    And I guess the tax code is pretty roundabout and circular anyways. The gov’t could probably find a way to re-tax my 2002 wages, if they wanted to bad enough.

  32. Rider says:

    The fact that gevernment now thinks it can do whatever it wants to fix it’s mistake is more disturbing then the fact that all this happend to begin with.

  33. FinanceGuru says:

    @SpaceBat_GitEmSteveDave: The short answer is probably yes. A handful of constitutional scholars have argued that it would be a bill of attainder, but I don’t think so. Clinton retroactively raised a tax rate, IIRC, in 1993 and it was held to be constitutional.

    It’s not that the bonuses would have been tax free to start with; it’s just that they would have been subject to tax at the usual federal rates for ordinary income. The bills that I’ve seen slap on an excise tax to bring the rate up to either a total of 70% or 90%, either on the recipient or split between employer/ee.

  34. FinanceGuru says:

    @couldberunning: Sorry, but Laurence Tribe — who’s forgotten more about conlaw than you’re ever going to know — disagrees with you.

  35. AD8BC says:

    You know, if we would have let AIG reorganize under bankruptcy law, they would have been able to modify the contracts that directed them to pay those bonuses.

    However, because they took a government bailout instead, the contracts still stand. Although it sucks that AIG paid those bonuses, they really were probably contractually obligated to.

    And they really were a very small expense compared to the amount of abilout money that AIG got. It’s really not big news. But once we people hear millions, and billions, and trillions, it all sounds the same, doesn’t it?

    Really, those who received the bonuses should return them voluntarily. But they should be under no obligation to. And I bet that this new “tax”, as proposed by the congress, if it passes, goes through years of court wrangling.

    It’s just not right to legally take 90% of what someone rightfully (if not morally) receives. It’s reprehensible to put a 90% tax on anything.

  36. tc4b says:

    I appreciate the effort, in that they’re trying to make right what they originally f’ed up, but I wish they would put their effort into the future. What can we do to prevent this happening again? Changing the rules after the fact might be popular in this case, but isn’t really indicative of a law and order society. Unless AIG broke a law. IANAL, did they?

  37. infinitemonkeys says:

    OK, for all the ‘Congress bashers’… at least get your facts straight.
    a) Treasury and Fed made the deals and ‘informed’ congress of them. Since then, Congress has imposed restrictions on the blank check the Treasury gave these companies.
    b) Congress, even when it does impose restrictions and rules, is not the administrative or enforcing body. Does anyone out there think Congress is running AIG or BofA?
    c) The government is not some hegemonic entity. Even the Executive branch has many departments. So complaining that siccing the IRS on AIG is biting itself in the ass is just stupid. Even if the government were merely a stockholder (and 80%), it is not on the board and has to act through stockholder action. Stockholders can demand companies do whatever they want, break contracts, sell divisions, fire executives, rename the company A**holes Infecting Government.
    d) Couldberunning, grow up and stop spouting the ultra-retarded nonsense that tax evaders have been trying since 1790. The government can and will raise taxes despite whatever rarified reading of the constitution you choose to subscribe to. I comfort myself with the knowledge that tax evaders normally wind up paying more taxes in the end due to heavy penalties. So go ahead and be that way. Pay more of my share.

    Regarding AIG in particular, I think this is just the injection of outrage the public needs to allow congress to act on hedge fund managers and others making unspeakably outrageous amounts just because they move even more outrageous amounts of money around.
    I’m no socialist. I’m a strong believer in capitalism, but the notion that capitalism is more perfect than democracy, which has many safeguards, watchdogs, checks and balances, and other mechanisms of correction is the truly un-American view.

    • Pylon83 says:

      You’re not entirely wrong, but c) does have some errors. Stockholders don’t have the power to force the Board to do much. They can propose and pass non-binding resolutions, but the board can just say “Ok, now piss off” and ignore them. The only recourse is for the Stockholders to kick out the board, and put in an new board that is more likely to fulfill their wishes. Even with a unanimous Stockholder vote, the Board can’t be forced to do much of anything other than leave office.

  38. Plates says:

    This sounds like an ex post facto law to me. Nothing like ignoring little things like the Constitution!

    • Pylon83 says:

      Read some of the other comments, or do some research on your own. The Ex Post facto provision only applies to Criminal laws.

  39. kwsventures says:

    Those in congress that approved giving billions to AIG with no oversight, no guidelines and without even reading the legislation they signed are now a bunch of pandering creeps “showing their outrage”. Please. Do us a favor and quit the congress right now. Do the right thing for once in your pandering life.

  40. Trai_Dep says:

    @ Plates: you’re the third person to bring up the ex post facto issue, so I’m guessing: it’s #1 on Rush Limbaugh’s tirade of the day?
    I know. I’m psychic!!

  41. cametall says:

    I thought this was unconstitutional.

  42. vladthepaler says:

    Won’t AIG just increase all its bonuses tenfold & then say they need more bailout money?

  43. couldberunning says:


    Do you think they are going to get away with raising it up to 91% against a targeted group of individuals?

    What about the people that are foreign based and are not US citizens?

    You dont think it is stupid that congress has known about this for months and are just now making a bid deal about this?

    They have given over a trillion dollars in stimulus and dont you think they should worry about protecting the money that hasnt been given out yet instead of grandstanding over a petty 140 million compared to the trillion dollars they are about to give out?

    • Pylon83 says:

      “Get away with” has many meanings. Will they “Get away with it” legally? Yes, they probably will. There’s not much to stop them from doing it, so long as they make the law sufficiently broad. Of course, Congress hasn’t always done a good job of properly writing laws, so there is a chance the SCOTUS will shoot it down because of poor drafting. Will they “Get away with it” when it comes reelection or fundraising time? Hopefully not.

      As far as the foreign citizens, the US does have Tax Treaties with various countries that they may be able to act under, but it indeed presents a more difficult circumstance.

      I personally think it’s incredibly stupid that Congress is now choosing to make a big deal out of it, solely for the purpose of political grandstanding and posturing.

      You have a very valid point about the relatively small amount of money in question here. It’s less than 1/10 of 1% of the amount AIG got from the government.

  44. Michael Traynham says:

    Yeah, um, psionix is spouting tax protestor propoganda. If you subscribe to that philosophy and actually practice it, you will eventually be held accountable civilly and may go to prison (a’ la Wesley Snipes). Seriously, no one likes paying taxes, but only an idiot really believes there’s no legal requirement to do so.

  45. couldberunning says:

    @pylon 83

    I think it is ridiculous that they got so much. After all it is everyone’s money including mine. These same people were last week saying 8 billion in pork or whatever large some it was “isn’t that much.” I am for them to ask for the money back but to pursue this is just ridiculous imo. Learn from there mistakes and take a little more time and think about the consequences of the stuff they approve. I would rather them take fault and move on.

    @whoever quoted me about “ex post facto”

    and on the status of the “ex post facto” This only applies to criminal legislation as pointed out. I mispoke on the this. Got to love some bad articles about it.

  46. AldisCabango says:

    Its time that congress and the senate were taxed for 90% of their income to pay back the tax payers for the damage they are doing to the economy everytime they increase the national debt.

  47. Daniel Kubik says:

    A little addendum to my earlier post:


    Regardless of whether or not the AIG bill is in fact a Bill of Attainder (it’s probably not) there are certainly a lot of people who would like to paint it that way.

  48. Rain says:

    If this works how I think it does, it won’t work. I’m assuming the $250,000 income limit is pre-bonus. Some of the AIG executives apparently agreed to take a $1 salary for the year. $1 is below $250,000 Ergo, no tax on the $6.4 million bonus.

    Do I have it wrong or is there a gigantic loophole?

  49. ericblair says:

    “She. Pencils. It. Onto. Paper. Ledgers. In 2009, at this very moment, inside the single largest taxpayer-expense-producing bureaucracy in America.”

    If this is true, then somebody else in her office is entering it in the DFAS ledger feeder systems. It is all automated. When the Army loses $50 million somewhere, it shows up in lovely Web graphics in the business intelligence front end.

  50. Jevia says:

    I’m curious as to how this would work practically speaking. These bonuses were paid out last year, yes? Some of those people may have already filed tax returns. Are they now going to audit those particular people and through the audit impose the additional tax?

    Otherwise, I can’t see how such could be imposed on filing the return, since the IRS doesn’t really “know” who you work for when you file the return. If you file electronically, you’re not even submitting a W-2 anymore. How would the IRS know who got a bonus from AIG and who just has a super large salary?

  51. arcticJKL says:

    The loophole here is that it becomes a term of the bailout funding. Want the money? Agree to the contract.

  52. tackhouse1 says:

    do it!

  53. humphrmi says:

    Wow, Congress is going to make the IRS recover roughly $165 million. Our economy is saved!

  54. PhiTauBill says:

    I’m fairly certain the floor number will include the actual bonus amount. The floor of $250,000 is also “family” income, so this bill is going to take back bonuses from secretaries at TARP banks who received $2,000 bonuses simply due to the fact that they might be married to someone who makes $250,000. Doesn’t seem fair to me… target those that got big bonuses (i.e. $50K or $100K or more) if you are going to try to go after the people actually responsible for this mess in the first place…

  55. johnsakalauskas says:

    In an interview yesterday, Hank Greenberg said he didn’t believe in employments contracts and they were brought in after he left AIG in 2005.

    Were the contracts were a form a illegal conveyance, where the company offered contracts to the big boys knowing fundamental problems with the business? How different would it be from Lehman’s Dick Fuld selling a $14M mansion to his wife for $100?

  56. darkryd says:

    Yeah the $250,000 stipulation is a bit shaky – is that before the bonus or after? If its before, this just means that they could defer any regular income and still be guaranteed by contract a massive bonus at the end of the year.

    Lots of CEO’s make $1.00 a year and the rest is in stock shares and bonuses.