VP adviser: AIG bonus tax may go too far

[JCMach1]

Source: Forbes

Vice President Joe Biden's economic adviser warned Sunday that a congressional plan to tax American International Group Inc. executives' bonuses may go too far in using the tax code as a tool for retribution.

President Barack Obama has not said whether he would veto some version of a House-backed plan to heavily tax the $165 million in bonuses. Biden economist Jared Bernstein said it is important to look at what version of the proposal comes out of the Senate.
Article Controls

"I think the president would be concerned that this bill may have some problems in going too far - the House bill may go too far in terms of some - some legal issues, constitutional validity, using the tax code to surgically punish a small group," Bernstein said on ABC television's "This Week. "That may be a dangerous way to go."...

Read more: http://www.forbes.com/feeds/ap/2009/03/22/ap6197200.html

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Neither Obama or his people 'get it' yet... :grr:

The good news is NEITHER do the Repugs...

Bad news- We're all screwed!

[saltpoint]

1. The specific percentages of the AIG bonus tax scale aside, the larger

point might be that a whole lot of people who are suffering hard times would like to strangle the top-level sons-a-bitches at AIG in broad daylight in the median of I-95.

[elleng]

10. Right, and I don't see what's so difficult to understand about this.

It seems clear that Prez O, Biden and Jared, and probably others, understand and would like to provide some relief, but its damned difficult to figure out what to do.

[saltpoint]

16. Hi, elleng. Agree. I don't have any terrific resolution to the problem

on hand. It is a hell of a mess.

I think the private conversations between Obama and Biden etc would be TERRIFIC to hear.

[elleng]

18. Yes it would!

Biden has SO much experience!

[redqueen]

2. "punish", "retribution"

Thanks for the framing. We can always count on the liberal media for the proper corporatist-enabling frame for these things.

[JCMach1]

3. This was the REP for Obama using those terms...! The framing is the administration's

As much as I dislike the corporate media, this BS didn't come from their mouths.

:(

[redqueen]

6. No, one from the writer, and one from *Biden's* rep, to be fair.

But good point.

I could go on a rant here about "moderates"... but I won't.

[JCMach1]

8. yeah corrected to administration- this royally pissed me off and I turned off the damn TV at that

point... Jeebus farkin' Kris he sounded was worse than the repugs they had on...

[BlooInBloo]

7. Do you even CARE if what you say is true or not?

[JCMach1]

9. ? not sure I get your point

[Hello_Kitty]

4. No shit, huh? eom

[Eric J in MN]

5. It's our money. This is about the people being able to control their own money. NT

NT

[w4rma]

11. He had better not veto that. (nt)

[Jennicut]

12. People who get so caught up in the pitchfork mentality

need to realize that crappy legislation can work against you down the road.

[aviationpm]

40. You're right.

Using the tax code is dangerous. Just refuse to give AIG anymore money since they are still mismanaging it and be done with them.

[Hansel]

47. No kidding. This is a very dangerous precedence.

Please let Congress wake up before it's too late.

[acmavm]

13. Do not give them another dime, get back what you're already given OR

liquidate and recover what we can. The end. Case closed. No more trouble.

And don't tell me that they they're too big to fail. It's the AMERICAN PEOPLE THAT WE SHOULD BE SAYING THAT ABOUT, NOT AIG!

edit: Let me clarify the 'no more trouble' remark before anyone responds. I mean, they're gonna come back again in another month or so and tell us they need more money, so kill them off now. Then we won't have to live with this blackmail anymore and it'll finaly be done with. Then we can deal with the blowback.

[fascisthunter]

14. Democrats will Lose Support for This... Big Time!

bunch of corrupted, complicit bastards.

[nyy1998]

15. This is quite a lot coming

from Bernstein, considering he is very liberal.

[lynne]

17. Sad to say, but he's right -

- not only will there be legal issues to deal with, those who receive the bonus and are taxed at 90% will get the bonus anyway as it will be credited to their tax return next year as "taxes paid for 2009". Either way, they get the money. It's win-win for them.

They will ultimately get their bonus as a tax credit while we spend yet more $$$ defending the legal battles. States will lose by not being able to tax on the full amount of the bonus. Whatever purchases may have been made with that bonus money won't occur so you can forget about the bonus money boosting the economy. Whatever city, county, state, federal taxes may have been incurred by purchases made with the bonus money won't happen, either.

This business about taxation at 90% is a method to divert public anger and frustration to AIG instead of to those who put together and approved this mess in the first place. It's a little too late to close this barn door as the horse is not only out but is waaaayyyy down pasture!

[mbperrin]

19. So if there's no problem with AIG on passing the tax, then we can

just proceed to do it, right?

People promoting the tax (like me) are for it,
and those against it (AIG) are mistaken in thinking it will have an effect, so they shouldn't care,

so let's pass it!

[Gin]

21. (IMO) the money is gone...they won't get it back...what I want is to hear

that regulation is in place.....reinstate previous regulations.....something to make us think there are punishable rules in place...now ..I feel they are still doing the same things with no recourse... except the taxpayer picking up the tab.

[lynne]

22. Sure, if you want to throw more good money after bad -

- as several long and expensive court battles loom on the horizon if it is taxed at 90% and taxing the money will serve absolutely no purpose. I personally prefer NOT to cut off my nose to spite my face as it's never pretty in the long run.

NOW, if we could get someone to actually review corporate policy and implement contractual amendments BEFORE we go into making deals with citizens money, then we'd be getting somewhere. Sadly, I don't see any evidence of that occurring.

[mbperrin]

28. I'd welcome a great public court battle! That's one of the things I hope for!

Plaintiffs: We failed our fiduciary responsibilities to our stockholders, we conspired together to sell worthless securities to others, and now that it's come out, we demand money from the taxpayers, your honor!

See how well this plays. Money invested in trials now will save trillions later. I have great confidence that RICO statutes can also be successfully used here. Nothing like some prison terms to serve notice that some things are actually against the law. Letting current perpetrators walk and warning that in the future, we'll get tough, reminds me too much of the "keeping our powder dry" approach to legislation during the last decade. "Keeping the table clear" is another non-policy non-action that allows these crooks to flourish.

Investigate, indict, convict, incarcerate.

Heck, if all justice is put on a scale of profitability, prosecuting people who murder only poor people, who rape only the mentally challenged, who rob only those with nearly nothing themselves, probably doesn't make dollar sense. After all, the "victims" are not really making much economic contribution anyway, so who cares what happens to them?

[girl gone mad]

43. I don't see where you have any basis to believe there will be lawsuits..

The House legislation is actually very good. It only applies to corps. that took over $5 billion in bailout funds. These are the businesses that would be bankrupt were it not for government largess. We tax welfare benefits at varying rates, we are well within our rights to tax this corporate welfare.

They can try to sue, but it won't go anywhere. I'm sure most people see paying lawyers to defend the law as a better use of our funds, anyhow.

[Hansel]

49. It is not true that all of these businesses would have been bankrupt

without the bailout funds.

All of the top ten financial institutions were given TARP money, but some of them did not need or even want it. This was a "clever" Bush administration scheme to keep the American people from knowing which banks were bad so they wouldn't rush to take out their money and completely collapse them. Now the good banks are being tarnished along with the bad.

In fact, some of these businesses were healthy and quite profitable. Of course, this asinine Bush scheme has done some damage to them because most people do realize this and are slamming them along that the real culprits.

[AZ Criminal JD]

24. It is unconstitutional

But that is just a piece of paper to you.

[mbperrin]

25. How so? Many tax laws are changed during the year. Money paid in

2009 is subject to 2009 regulations, which are being written and rewritten as we speak. That's why CPAs make great money - they keep up with the many changes each year.

[AZ Criminal JD]

27. It violates Article I, Section 9, parts 3 and 8.

Bill of attainer -- bills that relate to specific individuals or groups are forbidden.

[mbperrin]

30. Applies to all corporations receiving more than $5 billion in funds from government

and those making more than $250,000 who received a bonus.

Nothing specific about it.

Under your broad reasoning, giving exemptions to those with children would be too specific. In fact, under your thinking, a head tax might be the only that works, unless you want to consider the living are being singled out.

Look up the thousands of changes made each year to the tax code and find out why Warren Buffett pays a lower per cent of his income in taxes than his secretary. These loopholes go to certain categories and not to others.

[AZ Criminal JD]

33. That was a flip comment by Buffett

He does not pay a lower percent than his secretary. After he made that comment he was repeatedly challenged to prove it and he refused.

Main point: This is a very specific bill and is being used as punishment. That is one of the main tests the Supreme Court uses to determine if legislation is a bill of attainer. All one would have to do is get the comments made by Congresspeople in the last week into the case record and the SC would toss the bill.

[louis-t]

36. It is NOT punishment.

It is to stop a company that is receiving public bailout money from rewarding people who created the problem. That is NOT punishment. Punishment would be to FINE them, or put them in jail. I am so sick of repugs mischaracterizing what happened to cause this mess. An opinion article written by some corporate jerk was blaming people who "make $35,000 a year and buy a $600,000 house" for the financial mess. Show me ONE, just ONE person who did that with those exact numbers! It is impossible. Unless that person put down half a million, there is no way they could qualify. Rather, it is more likely that financial "wizards" manipulated markets, currency, securities, etc. with no regulation whatsoever.

[AZ Criminal JD]

37. Go to your local FBI office. Apparently you have not heard of "stated income" mortgages.

http://en.wikipedia.org/wiki/Mortgage_fraud

"In 2004, the FBI warned that mortgage fraud was becoming so rampant that the resulting "epidemic" of crimes could trigger a massive financial crisis.<3> According to a December 2005 press release from the FBI, "mortgage fraud is one of the fastest growing white collar crimes in the United States".<4>

The number of FBI agents assigned to mortgage-related crimes increased by 50 percent between 2007 and 2008. <5> In June 2008, The FBI stated that its mortgage fraud caseload has doubled in the past three years to more than 1,400 pending cases. <6> Between 1 March and 18 June 2008, 406 people were arrested for mortgage fraud in an FBI sting across the country. People arrested include buyers, sellers and others across the wide-ranging mortgage industry"

And it is punishment:

http://money.cnn.com/news/newsfeeds/articles/djf500/200903191959DOWJONESDJONLINE001032_FORTUNE5.htm

[girl gone mad]

46. Not punishment.

For all intents and purposes, these are public companies now and the public has a vested interest in insuring that their compensation matches their performance. As long as they are receiving public money (our money), it's appropriate to tax them at a higher rate.

[AZ Criminal JD]

50. So all employees that receive federal money should be taxed at a higher rate?

For example the employees at a school or university that receives federal money should be taxed a higher rate. If that is not true then the AIG is a bill of attainer as the Supreme Count as defined it.

[louis-t]

57. "1,400 pending cases" does not equal

millions of foreclosures. Sorry.

[mbperrin]

52. Nope. Here he is with the numbers. Google is your friend:

http://www.timesonline.co.uk/tol/money/tax/article1996735.ece

Buffett blasts system that lets him pay less tax than secretary

Mr Buffett said that he was taxed at 17.7 per cent on the $46 million he made last year, without trying to avoid paying higher taxes, while his secretary, who earned $60,000, was taxed at 30 per cent. Mr Buffett told his audience, which included John Mack, the chairman of Morgan Stanley, and Alan Patricof, the founder of the US branch of Apax Partners, that US government policy had accentuated a disparity of wealth that hurt the economy by stifling opportunity and motivation.

[AZ Criminal JD]

53. Yes I've seen those figures

Buffett was challenged to show his tax returns "I'm not trying to avoid higher taxes" and he has refused. He also has refused to show his secretary's return. No one who makes 60 grand is taxed at 30%. If they are paying that no wonder Buffett has been a financial disaster for people who have invested in him.

[defendandprotect]

20. No, it's criminal capitalism that has gone too far . . .

a bonus is a windfall -- we have precedent for that in the ExxonMobil "windfall taxes"

of the '70's after they made their killing in "oil shortages" of that period.

ExxonMobil should have been taxed again over the past years for these "windfalls" --

Obama was against it!!

In this case, these people don't deserve "retention bonuses" -- they're the people who

created these problems!!! These people should be in jail.

TAX the hell out of the bonuses, or reclaim them.

Additionally, we should take over AIG -- support workers and let executives go.

No government entity -- or a company on verge of bankruptcy -- should be paying bonuses!!!

Especially with the public taxpayer funds!!!!

[fascisthunter]

58. thank you

[Brucie Kibbutz]

23. UAW contracts can be torn up. AIG contracts? HELL NO!

When it affects executive pay, that sort of thing is illegal. Downright unpatriotic, even! :patriot:

[AZ Criminal JD]

29. Any contract can be torn up if both parties agree.

That was the case with the UAW. The companies didn't do it on their own.

[Brucie Kibbutz]

31. They didn't have any choice except to "agree", as you put it.

There never was any decision to "agree". It was either make more concessions or have the company go under. If they can force it on the UAW, why is it illegal to do the same to Wall Street?

[AZ Criminal JD]

32. There was a decision to agree. No one was "forced".

They had an option to not agree. They took the option which they thought best represented the interests of their membership. That is the same process that any party to any contract goes through.

[Brucie Kibbutz]

34. They didn't have an option to disagree.

Not when it meant all of them losing their jobs. This sort of ultimatum hasn't been given to Wall Street. You continue to disregard that.

[AZ Criminal JD]

35. Congress could certainly pass a law

Stating that any company, including auto companies, that choose to receive bailout money, had to fire all their employees and start anew. That would be constitutional and both in the case of Wall Street and the auto companies is probably needed.

[Brucie Kibbutz]

39. Or we could give AIG the same ultimatum given to the UAW.

Accept all of our demands for concessions or start looking for another job. Give them the same "choice" to "agree" or not.

[AZ Criminal JD]

41. Or we could have done the best solution

Don't give taxpayer money to any corporation. Let them sink or swim.

[Brucie Kibbutz]

45. AFAIK, the GM/Chrysler bailout was a loan instead of just

giving it to them. Not "giving" them that loan would have put no telling how many people out of work but you still don't like the idea of it. At the same time, you advocate giving bonuses, money we will never get back, to AIG thieves.

[AZ Criminal JD]

48. The AIG money is just a "loan" also. No difference.

The fact is that taxpayers will never see a dime from the AIG "loans" or GM/Chrysler "loans". GM and Chrysler are dead men walking. If you bother reading my posts you would notice that at no time did I advocate giving bonuses to anyone. I just believe in the rule of law and when contracts have been made then they should be honored unless the parties agree to something else. What I said is no money to anyone and let them sink or swim bonuses and all. So far AIG has been given 170 billion by Bush and Obama and people are worried about 165 million in bonuses. If every dime of the bonuses came back that would still leave AIG with 169.835 billion. The American people are so easy to con.

[UTUSN]

26. K&R#2 for, Yip, everybody EXCEPT ShrubCo thinks "UNconstitutional" is going too far!1 n/t

[Jefferson23]

38. Why were any of these top individuals allowed to remain employed at AIG

when the bailout was first drafted? They are being investigated and receiving a bailout at the same time, which is insane. As much as the bonus money is sickening, the very idea that these same people will have continued employment at AIG is a much more serious offense.

[Rashel]

42. Trying to recoup taxpayer money is not "retribution" as the article suggests!

[Beacool]

44. I am glad cooler heads are prevailing.

Mob mentality is not acceptable in the chambers of Congress.

Most of these contracts date back to late 2007 - early 2008 and most of them did not go to the executives of the Financial Products division. Furthermore, the majority of AIG employees do not receive bonuses, not even at Christmas. Nevertheless, AIG employees are being harassed, their lives have been threatened and many fear going to work.

Bonuses are standard corporate practice for executives at that level. It's done to avoid the top talent in the business going to the competition. Politicians act as if they had never heard of a bonus. AIG had informed the Fed about these bonuses (and others that are due later in the year) back in the fall when they negotiated the bailout deal. Who put the deal together? One of those people was Geithner. How can he claim not to have known about them? Besides, the government attorneys were the ones who told AIG that they had to pay the bonuses to avoid costly litigation. The Fed even hired outside counsel and they too came to that same conclusion. So, what's with all the phony outrage?

It's the usual B.S.; politicians are receiving many calls and emails from angry constituents who have lost their jobs and homes and want something done against these corporations. Politicians, knowing that these people can turn on them and vote them out of office, are using AIG as a scapegoat. Well fine, let AIG go belly up and default in over 70M policies worldwide and watch what happens.

BTW, if Obama and Congress had bothered to read the stimulus bill they would have seen the bonus exemption written into the bill. Oh, but Nancy had to run to meet the Pope and Obama took Michelle to Chicago to celebrate Valentine's Day.

Please.............

[Nye Bevan]

51. Here's one concern that I have seen

Imagine that you benefit from the new mortgage renegotiation rules.

Four or five years down the line, the real estate market has recovered and property prices have doubled relative to today.

Someone in Congress raises this issue: why should you benefit so much from the appreciation in your property, given that you accepted Government assistance on your mortgage? Wouldn't it be fair to tax this appreciation at an especially high rate (say 80%) to reflect the fact that if it was not for the Government you could have lost your house?

This is not so far removed in concept from the suggested new bonus tax.

[hugo_from_TN]

54. Actually, I believe something similar is in place.

If the bank agrees to lower the principle on a mortgage, and then in the future the house price rises and the owner sells the house for a profit, the bank will get part of that profit. I can't point to a link, but I'm pretty sure that is one of the features of the cramdown where the principle is reduced.

I believe this is fair.

[hugo_from_TN]

55. Unfortunately, this demonization of AIG is going to work against taxpayers.

All the money given to them is a loan. The only way we get that massive amount back (way more than the bonuses) is if AIG eventually stabilizes and can sell off the profitable businesses within it. The outrage that is being manufactured is making it highly unlikely that AIG will stabilize because I'm sure some of the smartest in the company are probably heading for the doors. Note, this might be folks that had nothing to do with the bad division that caused the mess, but they don't like the looks they get when they tell people they work for AIG anymore. In addition, other companies that could potentially buy the profitable businesses are going to shy away due to the outrage. It's the same reason baseball clubs aren't signing Barry Bonds. Why risk the bad publicity and potential damage to your business.

The bottom line is that we're torpedoing the only shot do get this money back.

[Beacool]

56. Thank you!!!

Finally someone with a cool head around here. If AIG fails, we lose the billions of dollars that the Fed gave them. It would behoove us to see AIG succeed. Why can't Congress and most in the media point that out? Because they are feeding the masses and they are out for blood. The only thing missing is a few Christians and some hungry lions.

:(