Using tax policy as a weapon is illegal
Beyond possibly being unconstitutional, the House vote to tax bonuses given to selected folks whose companies received federal stimulus and bailout money is a terrible idea.
But it’s not a precedent, at least not in the sense of using taxes as a cudgel.
Recall that very bad chapter in U.S. history when President Richard Nixon got his shorts in a wringer by attempting to use tax law to go after his enemies. Granted, the method was different. Nixon tried to “screw our political enemies,” as John Dean wrote in a 1971 memo to Lawrence Higby, by using IRS audits to harass the individuals named on his infamous opponents list.
But the motivation was the same: punishment. And the Founding Founders — men who risked their lives to form a nation free from the tyranny of the monarchy in large part because of outrageous taxes — would have been horrified.
Of course, they would have been horrified at the idea of an income tax.
Alas, Americans aren’t very good at history.
Using tax policy as punishment is dangerous business. And yet, there was President Barack Obama last Thursday, in between speeches in sunny Southern California and his close-up on “The Tonight Show,” releasing a statement that said the House decision to tax at 90 percent the bonuses for execs who make more than $250,000 at banks and financial institutions that received bailout money “rightly reflects the outrage that so many feel over the lavish bonuses that AIG provided its employees at the expense of the taxpayers who have kept this failed company afloat.”
“Now this legislation moves to the Senate,” he said, “and I look forward to receiving a final product that will serve as a strong signal to the executives who run these firms that such compensation will not be tolerated.”
If there’s any positive, he didn’t specifically say he hopes the measure will pass in the Senate. Maybe he’s praying the grown-ups on the other side of the Capitol will kill the bill so he won’t have to sign it.
Obama does remain fully and vocally committed to the man who made all this Kabuki theater on the part of Congress necessary, Tim Geithner.
American anger
Treasury Secretary Geithner deserves to be the target of American anger — or at least those Americans who aren’t blind sycophants to anything Obama and the rest of his administration do. Despite his attempts to throw Sen. Christopher Dodd under the bus for the weakening of the provisions of the American Recovery and Reinvestment Act that dealt with capping executive compensation, Geithner and Larry Summers, chairman of the National Economic Council, have their fingerprints all over this.
Dodd’s version prohibited TARP recipients from paying out bonuses, retention awards or incentive compensation to the 25 most highly compensated employees. According to a report in The Wall Street Journal, Geithner and Summers were worried that those rules would “prompt a wave of banks to return the government’s money and forgo future assistance, undermining the aid program’s effectiveness.”
Obama’s financial wizards asked Dodd to rethink his provision.
And gosh-by-golly if the conference version of the bill exempts “any bonus payment required to be paid pursuant to a written employment contract executed on or before Feb. 11, 2009.”
AIG, here’s your $165 million in performance and retention money.
Lawsuit anyone?
In her passionate defense of the tax-as-punishment insanity, Rep. Sheila Jackson Lee, D-Houston, dared AIG execs to bring on the lawsuit, so confident is she that the courts determine that the bill is constitutional. Pardon my confusion — and there’s a lot of that going around these days — but wasn’t one of the reasons Geithner got Dodd to change his amendment was to avoid lawsuits?
There must be a line of attorneys standing outside the homes of AIG execs this day, wanting to take their retainers.
X Jill “J.R.” Labbe is deputy editorial page editor of the Fort Worth Star-Telegram. Distributed by McClatchy-Tribune Information Services.