Here’s video of Chuck Schumer this morning rising to righteous indignation on the floor of the Senate, threatening to pass legislation essentially taxing away any financial gains made by AIG executives through their retention bonuses.
What I find distressing about this clip is Sen. Schumer’s eagerness to use the power of taxation in such a vindictive and punitive matter so as to confiscate the money already paid to the recipients. What is the world coming to when I actually find myself agreeing with Charlie Rangel (D-NY) that the tax code is not “a political weapon”? If only he talked this talk in other areas of taxation as well *cough* wealth redistribution! *cough*.
I have no problem with Congress putting pressure on AIG’s CEO to renegotiate the retention bonus structure – lord knows I won’t be seeing any this year – so misery loves company. But let’s face it – not only did Congress and the administration know of AIG’s intent to pay this bonus months ago, it guaranteed it by codifying it into law.
Admittedly, I don’t know the details of how this bonus program is structured, but there must be some sort of corporate “out” where AIG has the right to alter the program at its discretion (most companies with bonus and other incentive programs do). Why not restructure the program so the money is paid to the recipients as required by law, but held in escrow for a period of three to five years as the company rights itself. If the executives leave the company before this period, they forfeit the money – if they are laid off, they receive the bonus as part of their severance package. I realize this may be a bit naive, but so is passing a law specifically to tax away this income if the recipients don’t voluntarily give it up.
Wednesday, March 18, 2009
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5 comments:
Unless I'm mistaken, in the United States, the federal government is prohibited from passing ex post facto laws by Article I, section 9 of the U.S. Constitution and the states are prohibited from the same by clause 1 of section 10. In other words, Congress can't do shit about the bonuses already given out.
Don't tell them that - the House just passed legislation taxing the bonuses at TARP companies at rates in some cases of 100%. Congress fiddles while Rome burns...
But I don't think the tax applies to those at AIG who have already received their bonuses but rather it's going to be used as a weapon to prevent this from happening again at companies receiving TARP money.
Which is even sillier. If you were a recent Ivy League MBA with $250K in student loans, would you want to take a job with any of these companies?
Hell no. But I would take a job with a European bank, like the German giant Deutsche Bank. No one's going to want to work for an American bank anymore, especially after Obama starts setting the rules on executive compensation.
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