Friday, March 20, 2009

Tax on "AIG Bonuses" Hurts More Than Just Executives at AIG

I'm all for sticking it to greedy executives of companies who made buttloads of money at our expense. But guess what? Most of those guys (and yes, they're always men) are long gone. And so is the money. We'll never get justice from those guys.

But this bill, HR 1586, just passed by the House, overwhelmingly I might add, is atrocious. Each and every politician who voted for it must be considered a public bafoon.

Here's why. (Oh, there are so many reasons this bill is bad.)

First off, this was clearly a ploy to leverage the public outrage over the AIG bonuses that had already been planned, agreed on, and paid. President Obama did nobody any favors on this one, either, by saying that he was sending his dumbass attack dog, tax evader extraordinaire, Timothy Geithner (is that a Nazi name?) to the front lines to figure out how to stop the AIG bonuses from being paid.

So the constitutionality of the bill is in question. I'm no legal scholar, but this might fall under Article 1, Section 9, Clause 3.
Constitutional prohibition on bills of attainder.  states that "No bill of attainder or ex post facto Law shall be passed." A bill of attainder is an act passed by a state or federal legislature that punishes a specific person or group without a trial. In determining whether a piece of legislation violates the constitutional prohibition against bills of attainder, the Supreme Court generally tests whether the act specifies a group of people, contains a punishment specifically for that group of people, and does not require a trial. Given that criteria, this legislation could be ruled unconstitutional for imposing a tax penalty on a specific group of individuals.
I understand the public outrage. I do. But "Mob mentality" got us into this mess; I doubt it's going to get us out.

Another point to be brought up here is the fact that this bill is poorly worded. Again, I'm no legal scholar, but last time I checked, a "person" is not a "corporation." Yes, I do remember Business Law in college, and I do remember that corporations have the same legal standing as an individual. Corporations are legal entities. But this bill says,

        (A) any person who receives after December 31, 2007, capital infusions under the Emergency Economic Stabilization Act of 2008 which, in the aggregate, exceed $5,000,000,000,
        (B) the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation,
        (C) any person who is a member of the same affiliated group (as defined in section 1504 of the Internal Revenue Code of 1986, determined without regard to paragraphs (2) and (3) of subsection (b)) as a person described in subparagraph (A) or (B), and
        (D) any partnership if more than 50 percent of the capital or profits interests of such partnership are owned directly or indirectly by one or more persons described in subparagraph (A), (B), or (C).
I haven't received ANY TARP money, but the company I work for has. Last time I looked, Bank of America, Chase, Wells, and Citigroup were not people or persons.

By the way, my company was strong-armed into taking the money by Henry Paulson. Now, Chase could pay the money back and my particular issue would be moot, but this bill would still penalize folks who don't necessarily deserve it. More on that in a bit.

This is a so-called "Executive bonus tax." Guess what? The tax in this bill is applicable to married couples who make $250,000. In California, that's not really unheard of, even for "non-executives." Bottom line: Your salary does not determine whether you're an executive or not. Simply moving up in the ranks and being a middle manager over the course of 20 years could get you lumped into the same box as a true "executive" (you know, a guy or gal making "executive decisions" not the guy deciding whether the company letterhead ought to be in Verdana or Sans Serif font).

Contrary to the media and government representation that this is a tax on "bonuses," it is clearly much more than that.

In fact, it's not about the bonus at all; it's about the income. Look at this passage:
      (1) IN GENERAL- The term `TARP bonus' means, with respect to any individual for any taxable year, the lesser of--
        (A) the aggregate disqualified bonus payments received from covered TARP recipients during such taxable year, or
        (B) the excess of--
          (i) the adjusted gross income of the taxpayer for such taxable year, over
          (ii) $250,000 ($125,000 in the case of a married individual filing a separate return).
What does this mean to you? Again, I'm no Jacoby & Myers, but I read this to mean that if you work for a company that got TARP funds (hear me, Detroit?), you're married, you make $30,000 a year, and your spouse makes $1,000,000 a year, guess what?

You get taxed at 90 percent on $750,000 PLUS the "normal" marginal rate on the first $250,000!

Is this fucked or what? Am I reading that right? I know the dolts in Congress aren't the sharpest tools in the shed, but do they read this shit? Who writes it?

I have a really hard time believing that they'll tax people like this, but this is what the verbiage says, no?

And if this passes into law (read this, Obama), the US Treasury (IRS) gets to "interpret" it. You think they have an open mind on this? They want their money back!

Hey, Treasury! Just because you gave money away with no strings, don't get all pissy at poor working Joe and try to take his money.

Here's some background. I work for a financial institution that was taken over by the FDIC and then given to another bank. This other bank had to keep the wheels turning, so they offered me and a lot of other folks an incentive to stay. This goes all the way back to October 2008.

They had to retain the talent, else bank operations conducted by WaMu might get totally out of whack. In essence, the employees made a deal with the bank. This is before the bank got any TARP funds.

Had we known our incentive would be wiped clear, we could have started looking for other employment 6 months ago, when the job market was better. As you know, the labor market is a lagging indicator, and it's gotten worse, even if the economy has stabilized (questionable at this point).

So we've actually been put in a nut wrench because we have a lower likelihood of finding a job. Plus, our "incentive" may turn out to be a small fraction of what was promised to us.

I don't see where the government thinks it can break a contract between an employee and a private company (publicly traded, but certainly a private enterprise).

I know, it's "for the good of the country." Bullshit. It's because Congress and the President want to grandstand and proclaim that they were "on the side of the people." But you know what? It's people like me and my peers, white-collar working stiffs, just trying to do our jobs, and having nothing to do with the crackpots on crackpipes who got us into this mess, that are going to pay most dearly for it all.

Not only are many of our houses underwater due to the financial shenanigans our "leaders" pulled off (and don't forget Congress and the repeal of banking regulations in the late 90s), but we're about to be jobless and get robbed of what was coming to us.

I don't care where you stand on "executive bonuses." I am NOT an executive, yet I may get slapped with a marginal tax rate the likes I have never seen (back in the Kennedy days). And this is NOT a tax on bonuses. It's a tax on success.

If Congress passes this and President Obama signs it into law, they are no better than the last set of politicians we voted (mostly) out of office.

The rule of law is what this country was founded on. That, and the entrepreneurial spirit. Self-interest with prudent oversight. Capitalism. Middle class rising up.

God forbid we actually try to live up to those ideals.