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Saturday, March 21, 2009

Congress Out Of Control: Pelosi's Retro Bonus Tax

We have written quite a bit about the AIG bailout and those will be listed at the end of this piece under "previously written", but before we get into Nancy Pelosi's bill that passed the House which places a 90 percent tax on bonuses paid, let us get some other stuff out of the way first.

People are angry about all the bailouts. AIG was handed a fourth bailout a couple weeks ago, by our government using your tax dollars, to the tune of $30 billion which brings the grand total in bailouts to them to $170 billion.

People were angry.

On the heels of this news, the people found out the monies handed to AIG allowed them to give out bonuses, $165 million in bonuses, that were guaranteed by the contracts previously signed with those employees.

There is your recap making a much longer story short and simple, as I said, you can get into how the Obama administration knew about before handing over the $30 billion, or how Obama signed the stimulus bill with an amendment guaranteeing payment of those bonuses, all below under "previously written."

Now, try for a second to put yourselves in the place of those employees who received those bonuses.. the amounts do not really matter as much as how you would feel if you signed on with a company and signed a legally binding contract which stated that you would receive XXX amount on so-and-so date as a bonus, then when the time came to give out your bonus, the company went back on the contract and didn't pay you.

Had the government not stepped in and given AIG billions of dollars, like any other failing business, that company would have had to file for bankruptcy and/or closed it's doors and there would have been no money to pay out those bonuses.

If a private investor or , anyone (think our government) poured enough funds into the company to keep it going, those contracts had to be honored.

Pelosi's Tax on Bonuses Bill:

Now to the meat and potatoes of this piece.

The House, headed by Speaker Nancy Pelosi, just passed a bill to put a 90 percent tax, retroactive tax, on the bonuses paid. Roll call found here.

Title: To impose an additional tax on bonuses received from certain TARP recipients.

Think about how out of control Congress is right now where they think they can arbitrarily impose a retroactive tax on bonuses paid according to law because of contracts signed, and created a whole tax specifically targeting one group of individuals.

Think about that for a second.

Power Line gives a great example of how this could be applied to others, not just AIG:

Wells Fargo didn't want any TARP money, but the government forced it to take more than $5 billion worth, so Wells Fargo employees who receive bonuses would be subject to Pelosi's proposed tax. Say you're a teller at a Wells Fargo branch in Minnesota and you're married to a lawyer who makes $250,000 this year. You get a $10,000 bonus for your good work during 2008. The government steals it all (90 percent federal plus 8.5 percent state plus, unless it's included in the 90 percent, 3 percent Medicare). That is simply insane.

Yes, it IS insane and thankfully GOP members of the Senate are actually beginning to understand how insane.

The Senate Republicans, led in this instance by Senator Jon Kyl, managed to block the House bill from coming to a vote and acting as rashly as Pelosi did in the House to jam this bill through with the motion to "Suspend the Rules and Pass" the bill.

Sen. Jon Kyl, the Republicans' vote counter, blocked Democratic efforts Thursday evening to bring up the Senate version of the tax bill to recoup most of the $165 million paid out by AIG last weekend and other bonuses in 2009. The House had swiftly approved its version of the bill earlier in the day.

By rushing, Kyl said, Democrats were letting populist outrage trump informed decision making in the Senate, which is supposed to be insulated from the pressures of public passion.

"I don't believe that Congress should rush to pass yet another piece of hastily crafted legislation in this very toxic atmosphere, at least without understanding the facts and the potential unintended consequences," Kyl said on the Senate floor. "Frankly, I think that's how we got into the current mess."

Senate Democrats will still try to get some version of this bill passed but the Senate Republicans understand that our Congress cannot act blindly and in a panic and start passing arbitrary bills that are bad, just to appease people who might be angered about the bonuses, but who are more angry about the bailout itself, which allowed those bonuses to be paid.

Should Senate Republicans fail to keep blocking this arbitrary bill, the New York Times reports that Barack Obama is also "uneasy" about taxing bonuses in this way.

The White House stopped short on Friday of endorsing legislation to severely tax bonuses paid to executives of companies that accepted taxpayer bailout funds.

Administration officials said instead that President Obama would assess the potential effect of the bill that emerged from Congress on efforts to stabilize the financial system.

At the same time, as Wall Street executives anxiously pondered the ramifications of the measure quickly passed by the House this week, some Senate Republicans began to voice opposition to the legislation, saying it was hasty and abusive.


Mr. Obama, who initially said he welcomed the effort by Congress to tax bonuses, is now taking a more measured approach. The White House press secretary, Robert Gibbs, said the administration would have to consider the impact of the legislation on its wider efforts to prop up banks and increase the flow of consumer credit to families and small businesses.

“The president shares the outrage and the frustration that everybody has,” Mr. Gibbs said at his daily press briefing Friday, referring to $165 million in bonuses paid by the American International Group. Mr. Gibbs also acknowledged the larger goals. “All of that will be evaluated throughout the process when a bill gets to his desk,” he said.

The problem there is, Obama isn't saying no outright, he is hedging his bets.

Have a spine Obama, a president doesn't always do what is popular, they need to do what is right.

Allowing Congress to walk all over him is the worse thing Obama can do at this moment because if he does, they Pelosi will not stop using the House to continue doing so.

The bottom line here is that tax payers wouldn't give a damn about the AIG bonuses had the government not handed AIG the tax payer's money to pay them with.

The anger is over that, not the bonuses themselves.

Previously written:

Throwing Good Money After Bad To AIG

Tax Payers Paying AIG Execs $165 Million

Bailout Fatigue May Hurt Obama's 'Agenda'

More Blowback Against Obama Administration

Obama Guaranteed AIG Bonuses, Then Pretended 'Outrage'

AIG Clusterf*ck and the Obama Administration

Videos- AIG, Barney Frank, Shep Smith and Executing People With 'Piano Wire'

VIDEO- Obama On Leno Show: 'Stunned" I Tell Ya!Tell Ya!!