Congress is oblivious to the disastrous potential of their vendetta against the AIG executives, but the center-left TaxVox sees what's happening all too clearly:
If Congress wants to limit bonuses for employees of bailed-out companies, it should just do it. But using the Internal Revenue Code is a truly terrible idea. And dipping into the Code to win political points is worse. Long ago, people were rightly outraged when Richard Nixon tried to turn the IRS into a weapon to punish his enemies. This gotcha tax is another variation on the theme, and nearly as inexcusable. Imagine, for instance, if a GOP Congress retroactively barred people from deducting charitable gifts to Planned Parenthood. Or Democrats imposed a 50 percent surtax on companies that that do security work in Iraq.
This faux-populist mob isn’t being led by a bunch of back-benchers. The House today overwhelmingly passed a 90 percent tax on some of these bonuses. Senate Finance Committee Chairman Max Baucus (D-Mont) and ranking Republican Chuck Grassley (R-Iowa) would impose a 70 percent excise tax (35 percent on the company and 35 percent on the employee) on many bonuses paid by firms receiving TARP money. I’m inclined to believe they have done this to release some of the issue’s political steam before the kettle explodes, but nonetheless, it's still dreadful legislation.
Read the whole thing. And remember that if they can confiscate AIG bonuses, they can confiscate yours, too, next time you are unpopular and in the minority. What, you say you had a contract? A promise? Tough, you lost the election, buddy.
UPDATE: A roundup from the TaxProf
The really distressing part is what this tax will do to the corporations that we now own and are supposedly trying to save.
(Remember? That's the reason we bailed Citigroup, AIG, GM, and the rest of them out--to save them. Because we convinced ourselves that civilization would end if we didn't.)
Thanks to our
stupiditybailouts, we now own major stakes in these firms (at mind-boggling expense). So it's not clear why we want to destroy them. But that's what we seem determined to do.
The items included in the Tax Update Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation.
Joe Kristan writes the Tax Update items, and any opinions expressed or implied are not necessarily shared by anyone else at Roth & Company, P.C. Address questions or comments on Tax Updates to