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Is Bonus Takeback Legal?

Interesting development this morning. Our Readers Who Comment, who last week were universally in favor of getting back those federally financed bonuses from AIG executives, are divided on the topic this morning. They still don't like the bonuses, but the concept of the government targeting individuals with the tax code after the fact strikes many of them as questionable and probably unconstitutional.

As Michael A. Fletcher and Anthony Faiola report today, Obama Administration officials -- not to mention such commentators as Jay Leno the other night -- share that concern.

There's plenty of anger about the bonuses in the comments from both positions and many readers clearly want tax revenge. Others note that while the bonuses are indeed an outrage, they are also a distraction from the prime objective of managing the larger crisis.

We'll start with hsgskemoose who wrote, "...As much as these bonuses bother me, it bothers me more that Congress forgot to read Article 1, Section 9 of the Constitution they all swore to uphold and defend: "No Bill of Attainder or ex post facto Law shall be passed."

FUZZYTRUTHSEEKER said, "Yes, they should not tax the robber barons. They should tax suckers like me who have worked all my life (35 years!)...only to see more than half of [my next egg's] value vanish in thin air because of the same robber barons..."

bum1 wrote, "jared bernstein [Vice President Biden's economist] would need to cite some constitutional law cases for me to believe that Congress can't create a tax that affects hundreds of executives. I mean, there are taxes on items like luxury airplanes and how many people buy those in a year, yet those taxes haven't had their constitutionality challenged..."

yarbrougharts suggested, "How about, "I own 80% of you, I demand you give back 95% the bonuses or you will receive no more help, you figure out how to reword your contracts, get it!"

AAVp7a1 wrote, "...For congress to punitively tax someone sets a DANGEROUS precedent. They could, theoretically, in the future tax someone they don't like, be it a Baptist minister, gun maker owner, political party member, etc."

farhorizons said, "Obama and Co. really need to decide where they stand. Are they for Congress's determination to tax the bonuses, or against it? ...We need clarity and focus. Where are they?"

XLiberalJack wrote, "I hate to say this, but I think we have to let them keep the money because we gave it to them freely..."

marcopolo511 suggested, "...How about AIG and the other banks keep track of all the bonuses they feel are due, on paper of course, and when every cent is paid back to the public, with interest of course, they can be as generous as they desire with there bonuses."

warhawk911 asked, "Is it just me or is this administration all over the map regarding AIG?"

kubrickstan wrote, "Twenty years from now, will anyone remember this nagging subject about AIG bonuses? Our country is falling to it's knees. Who are we America?... Give Obama a chance to succeed, otherwise your wishing for him to fail. Rome burns, while we focus on 170 million dollars..."

mharwick said, "...A simple phone call to Nancy Pelosi could have stopped the rush to stupidity. Why didn't [Obama] call her and stop it? Politics and lack of leadership."

johnbsmrk wrote, "Anyone surprised...it is an utterly loopy piece of legislation which is very unlikely to pass muster with the courts. I think the admin is sensing the fever is breaking over this now that people have had time to sleep on it. It's basically going nowhere."

jbc3 said, "Punishment? Hardly. The proposed 90 percent tax would recover money that belongs to American taxpayers, and the AIG boneheads would still get to keep 10 percent of their ill-gotten gains... Wise up, Obama. This is NOT change we can believe it. It's like Bush never left..."

We'll close with two well-expressed views of the bonus situation:

aorj wrote, "I don't care how you go and get them. Just go and get them. Do it legally. Do it quickly. Do it permanently. Surgically taxing them for what they did is fine with me. You have the great majority of the population behind you. This is a democracy. You've received your mandate. Do it..."
.
But msmellick said, "The plan is unconstitutional. It is not a matter of whether the bonuses are kosher; they clearly are not and everyone is in agreement about that. The plan is simply not legal."

All comments on this article are here.

By Doug Feaver  |  March 23, 2009; 9:14 AM ET
Categories:  Bailout , Economy Watch  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Federal Reserve Under Fire
Next: Readers Rate Obama's Style

Comments

" It's like Bush never left..."


And the former President loves it.

So do I.

Posted by: GaryEMasters | March 25, 2009 9:44 AM | Report abuse

"How about, "I own 80% of you, I demand you give back 95% the bonuses or you will receive no more help, you figure out how to reword your contracts, get it!"


OK.

How about "Take this job and shove it."

Posted by: GaryEMasters | March 25, 2009 9:41 AM | Report abuse

Come on. The House can talk tough when they know the Senate will say "no" or the President will veto it. They always do it that way.

Posted by: GaryEMasters | March 25, 2009 9:37 AM | Report abuse

Well, the Bush White House passed retro-active taxes on college savings back in 2000 and the courts decided that was completely legal, so I can't see why a retroactive tax on bonuses wouldn't be. At least the taxes on bonuses occurs in the same year, whereas the Republican tax on college savings went bak five years.

Posted by: mibrooks27 | March 23, 2009 12:52 PM | Report abuse

I heard an idea this morning that might clean this mess up. Ask (force?) those companies who were given federal bailout money and then gave out bonuses to return a portion of the bailout money that equals the bonuses they gave out. Not sure if this can be made into a law, but I'll bet it would be easier for the taxpayers to get that money back from the companies than by taxing those who received the bonuses.

This punishes companies which gave out the bonuses and puts the wedge properly between the company and the executive. It might also help teach a sorely needed lesson, that huge bonuses for execs hurts the company. And it might even be legal.

Americans would get bonus money back and a little satisfaction. It won't hurt the execs getting the bonuses, but really, they are not the problem. Its the company that is handing bonuses out, not the execs giving bonuses to themselves.

Posted by: bevjims1 | March 23, 2009 12:37 PM | Report abuse

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