Posted on 03/19/2009 3:10:08 AM PDT by Scanian
To our surprise, Hill sources tell us House Speaker Nancy Pelosi is getting significant behind-the-scenes pushback from several of her committee chairmen against moving quickly on legislation imposing steep excise taxes on executive bonuses granted by firms that receive taxpayer bailouts, like American International Group, Inc.
We wholeheartedly endorse their belief that there should be a prudent and well-calculated examination of the situation before slapping together legislation to address the challenges presented by AIG's controversial rewarding of its officers.
Senior Democratic sources said Energy and Commerce Committee Chairman Henry Waxman, and Financial Services committee Chairman Barney Frank have argued privately that legislators should take more time and avoid creating an irresponsible tax-based response to the public outcry. House Ways and Means Chairman Charles Rangel even expressed public unease about attacking executive bonuses via the tax code, but that was before signaling Wednesday he was putting together legislation in coordination with Treasury Secretary Tim Geithner to do just that.
(Excerpt) Read more at washingtontimes.com ...
I think a surtax is a fine idea. Make it 110% of all bonuses paid, as an example to encourage the others.
Now why would I want them to do that. They’ll just do something stupid and strip my bonus when my company is actually successful.
Mark
For future actions, it is debatable public policy, but to reach back after the fact and target a specific group is an unconstitutional Bill of Attainder and an Ex Post Facto law. This type of power could be employed against any person or group who is out of favor. Don't like actions by Rush Limbaugh or Right to Life groups, tax them into oblivion for actions they have already taken, for instance.
To be sure, it’s not a brilliant precedent to set, and neither does it make for brilliant law. But paying obscene performance bonuses in non-performing companies with public bail-out money is a travesty and a grotesque offense to Natural Justice. And it doesn’t make for brilliant compensation Best Practise, either. It sends the entirely wrong message to the American (and to a lesser degree, the foreign) workforce: incompetence and non-performance will be rewarded — by Government intervention if its bad enough to sink your company.
"AUTOMAGIC", Cool word Mark. As in their AUTOMAGIC money printing press and AUTOMAGIC cover stories, etc.
If Congress does that there is another problem:
Since the now gone execs depend on the bulk of their pay from their bonuses, Congress would be taking their woirk and refusing to pay them for it. They are not violating IRS law about what constitutes an employee versus a contractor.
These execs would become de facto employees of the Federal governement, and Congress would be getting a violation notice from Turbo Tax Timmy that they owe back taxes on these wages.
This is the scariest proposal I have heard from this administration yet. This is the slippery slope that will come back to bite each and every one of us in the future!
For instance, the company I work for is a private company that gets approximately 60% of its work via government contracts. I also get both longevity bonuses, and quality bonuses. They are minimal amounts (less than $1,000.00 a year) but I work hard for those. What if eventually the Obama team decides he hasn't taxed bonuses enough, and all bonuses should be included? That way he can keep his promise of not taxing incomes of the "bottom" 95%.
Please be careful what you wish for, it could well come true.
Excellent point. The main factor that makes this nation the one illegals are breaking into and drowning to get to is our rule of law and our guiding principle that everyone is equal under the law. The right of private contracts is an especially important part of the rule of law. When that rule of law is subverted, especially in times of emotional outcry and for political expediency, we have seriously eroded the foundation of our stable government. What makes many other nations places from which to free is the lack of that principle. Where the rule of law falls or never existed, laws become mere tools in the hands of the powers-that-be to reward their followers and punish their detractors.
Everyone is caught up in the emotions about the characterization of this money as bonuses and the size of the bonuses here. What is at stake is the principle of a private party to contract with another private party and have the benefit of laws to enforce such freely-contracted obligations and rights. This sort of thing goes far beyond these “outrageous” bonuses and undermines employer-employee relations and nearly every commercial agreement.
Right now people are reacting emotionally and demanding the law step in and change the terms of the agreement if certain sympathetic parties (taxpayers or “surprised” politicians) argue the deal, which preceded the involvement of the taxpayers and politicians, was somehow unfair. Of course, this is quite popular right now. This is akin to the calls for abrogating property rights laws by the increasing calls for cramdown on mortgages and credit card debts, by demanding property owners satisfy environmental laws passed after they purchased the property, and by unfunded mandates. But it is destabilizing contractual relationships and will come back to haunt us.
As you noted, it further causes problems by setting up a precedent of government interference with private contract rights when enough people demand it. While this initial interference is supposedly to be limited to “bailouts”, the definition of “bailout” can easily be expanded to include all government contractor firms for example. Unfortunately the government already has precedent of broadly interpreting its “largess” when it wants to do so and it needs do no more than point to the ridiculous interpretations to the interstate commerce clause.
People feel somehow “morally outraged” at AIG’s greed, but greed or envy also lies at the bottom of the “outrage” by too many otherwise wise citizens. They need to forget the specific details of this situation and ask themselves whether it is proper for the government to use tax laws to abrogate past private contractual relationships solely on the basis of public demand.
Excellent analysis. An old aphorism seems to apply here. We are coming to a point of having a “legal system” not a “justice system.”
Wonder how the people clamoring for these contracts voided would feel if the government wiped away health care benefits for UAW workers to save GM? Pensions for teachers?
An AIG Executive is contracted just like and assembly line worker. What we see in the AIG outrage in class envy.
That said, as shareholders of AIG, we should demand the compensation committee bring future comp plans in line with current business conditions.
Well, the U.S. rule of law does tend towards being a legal system over a justice system. That’s not necessarily bad. A legal system is based on written laws, predictability and equality. A justice system can depend on whose definition of justice rules. The vast majority of people will contend that notions of justice govern their acts on anything from interpreting contracts to murder to despotism. Hitler believed in “justice” for the Germanic peoples. Mao believed he was being “just”. The Crusaders believed they were being just. What the U.S. legal system does is establish that laws be written plainly enough that reasonably intelligent people can determine whether or not they wish to risk violating those laws. Nearly every law will be considered just by some, unjust by others, but the U.S. system concerns itself less with justice and more with fair notice and equal application.
Some legal systems in the world do concern themselves with “justice” overall. The idea is that the justice system exists to search for “truth” or “justice” in each individual case. It is a laudable goal but practically not very good. It basically requires the defense attorney to become a prosecuting attorney if he or she believes the client is guilty and it doesn’t require a confession by the client to allow that determination. In both criminal and civil cases, the notion of precedent is tossed out the window. And precedent is a vital component of our ability to predict whether or not our future acts may be violations of the law. I will be the first one to say our legal system is far from perfect. It won’t be perfect until we have the ability to read thoughts and determine truth in an absolutely infallible manner. In the meantime, our “legal system” is the worst in the world—except for all the others. ;o)
Good points. When the principle or precedent reaches our level, we tend to think twice about whether it was wise. And, yes, future contracts certainly should be negotiated with bailout funds in mind for those companies that voluntarily accepted bailout money. That preserves the right of private contract by establishing the ground rules before the contracts are entered into by the parties.
I guess this is yet one more reason why the bailout is a bad idea, ay. No matter what happens, if bonuses are paid the alternatives are bad: either they get yanked back and bad legal precedent is set, or they get paid and bad remuneration precedent is set.
The Devil and the Deep Blue Sea. Perfect. Obama should have fun juggling these turds.
well that *is* what will happen when the car companies finally enter bankruptcy. The government should have explicitly stated that them bailing out AIG (and taking a controlling stake) was equivalent to a type of limited bankruptcy and they had the power to nullify contracts.
AIG effectively went bankrupt, in which case these people would not have been paid anyway. I agree that this is a stupid precedent, since they should have covered this when they initially intervened, but anyone who writes “OMG, i get gov’t contracts and they’re gonna take my money!!” is just spouting more “the sky is falling! I swear this time!” crap.
(1) Bonuses should be based on profitability and (2)Stock options should not be allowed to be sold until 5 years after they are "given". Ergo, the company has a tough year, so do the people getting bonuses, but if it has a good year, the "goodness" is shared. Getting it right becomes an incentive. Also, the guys getting stock options (who should be the decision-makers) would make better long-term decisions if the value of the stock in the future was at stake for them.
Bonuses and options should not be entitlements, but based on profitability and productivity
(Note: retention bonuses should not be called bonuses, they should be called retention renumeration).
I second that! If the taxpayers are forfeiting their pay raises and companies matching their 401k contributions; the least Government officials can do is also show there support by forfeiting a pay raise in an economic melt down. Besides, raises usually are vetted out for performing your job in a at least a satisfactory performance-—can’t say that what the American folks have seen thus far as being performed satisfactory. Ninety nine percent (99%) of the taxpayers were against the bailout and rather then listen to the American public; they passed all of these bailouts and submerged us all into a swell of fraud, corruption and greed. For that; they pat themselves on the back and want the American population to be grateful. To them I say-—shame on you!
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