Will Senate Slow the AIG Tax's Roll ... To A Halt?
Since TPMDC first noted on Friday that the Senate was putting the brakes on the AIG-inspired bonus taxation bill, the signs of a further slowdown are piling up.
As more banks warn that a broad bonus tax would drive them out of the open arms of the Treasury Department, even senior figures in the Obama administration are suggesting that the House's 90% levy on this year's bailout bonuses might not reach the president's desk.
But where does that leave the Senate, which aims to take up the bonus tax plan in the coming days? In a potential pickle, with must-get centrists such as Kent Conrad (D-ND) and Susan Collins (ME) cool to the idea and Majority Leader Harry Reid (D-NV) already facing a huge challenge in marshaling support for the White House budget -- which is scheduled for floor consideration starting next week.
Even House Financial Services Committee Chairman Barney Frank (D-MA) -- who is supporting a bonus tax bill that would impact far more companies than last week's AIG-inspired measure -- took a mushy line on the 90% tax yesterday, telling CBS: "I voted for the bill. I was not a major advocate for it."
If senior lawmakers keep coming down from last week's woozy, angry anti-AIG high, look for tomorrow's testimony from Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke to be more of a test of political capital for Geithner than an AIG frustration-fest.
Josh
Elana
Matt
Eric
This bill is a rotting turkey just like the Patriot Act--ill-conceived, ineffective and a zillion unintended consequences. The only differenc, I hope, is that this fiasco never becomes law.
March 23, 2009 11:23 AM | Reply | Permalink
"zillion unintended consequences".. please list 3.
March 23, 2009 11:25 AM | Reply | Permalink
"unintended". Do you know what that means, junior? I don't claim to be able to see into the future, like you.
March 23, 2009 11:31 AM | Reply | Permalink
Still you know it's a "fiasco" and has "zillion unintended consequences". You really got your BS machine going. How about providing facts and arguments why it's a failed bill. Make 3 constructive arguments as to why the bill shouldn't be approved by the senate.
March 23, 2009 11:38 AM | Reply | Permalink
1. It's unconstitutional.
2. It's unconstitutional.
3. It's unconstitutional.
Now, you make 3 arguments why you're not an asshole.
March 23, 2009 11:57 AM | Reply | Permalink
Saying it's unconstitutional doesn't make it unconstitutional. Please explain why it is unconstitutional. What section of the constitution does it oppose?
March 23, 2009 12:02 PM | Reply | Permalink
For a know-it-all, you sure do expect people to take you by the hand and do all the research and work for you. Not gonna happen.
March 23, 2009 12:10 PM | Reply | Permalink
Sounds like it's easier to pull BS from your behind. You're unable to argue your point. Why is it unconstitutional?
March 23, 2009 12:16 PM | Reply | Permalink
"No Bill of Attainder or ex post facto Law shall be passed." (Article 1, Sec 9.)
March 23, 2009 12:30 PM | Reply | Permalink
"No Bill of Attainder or ex post facto Law" is about Congress convicting someone through legislation.
It's not about raising taxes on bonuses which exceed $250,000.
March 23, 2009 1:36 PM | Reply | Permalink
Really...?
U.S. v. Lovett, pay checks were taken from government workers Congress could accuse of being Communists. This was an asset forfeiture case. It states:
"Legislative acts, no matter what their form, that apply either to named individuals or to easily ascertainable members of a group in such a way as to inflict punishment on them without a trial, are 'bills of attainder' prohibited under this clause."
March 23, 2009 2:08 PM | Reply | Permalink
Switch "cutting off the pay" with "taxing the bonus" and I think we have a case.
"(c) The fact that the punishment is inflicted through the instrumentality of an Act specifically cutting off the pay of certain named individuals found by Congress to be guilty of disloyalty make it no less effective than if it had been done by an Act which designated the conduct as criminal. P. 328 U. S. 316."
March 23, 2009 2:19 PM | Reply | Permalink
Only the bill of attainder clause might apply, not ex post facto. Whether this bill is an attainder will basically come down to whether Congress intends to punish. (The actual test established in the case law is more detailed, but I think it basically resolves to the punitive question.) The problem that the bill faces is the intemperate comments made by legislators that might be used to build an argument that the legislation is punitive.
I don't think the bill is punitive, despite those comments. The purpose of the bill is (or should be) to recover public funds that are not being used for their intended purpose. The intended purpose was to restore the financial system, not to enrich individuals. I also find it ridiculous to suggest that executives are being "punished" by government taxation of their 2008 bonuses when those executives wouldn't even be getting their 2008 base salaries without government intervention.
My argument, though, depends upon the bill being targeted toward zombie institutions, i.e., institutions that would be insolvent but for government intervention. (Otherwise, the money paying the bonuses isn't necessarily public funds, and the executives would get their full pay absent government intervention.) I am not sure whether the $5+ billion TARP fund limit in the bill successfully targets only zombies. I would instead have the new tax cover only institutions in which the government owns a majority (or higher) stake.
March 23, 2009 2:37 PM | Reply | Permalink
"The purpose of the bill is (or should be) to recover public funds that are not being used for their intended purpose."
Since language was written into the bill allowing the bonuses it's hard to argue that the bonuses qualify as "funds that are not being used for their intended purpose."
March 23, 2009 2:58 PM | Reply | Permalink
You might be confused. No language was written into the TARP legislation allowing the bonuses. What happened is that, subsequently, Congress added language to the stimulus bill to limit executive bonuses for TARP recipients. At the Treasury Department's urging, Congress provided an exception allowing TARP recipients to make bonus payments required by existing contracts.
Thus, there is no legislative history that suggests Congress wanted these funds used to pay bonuses. Instead, the legislative history shows the opposite: Congress did not want these funds used to pay for bonuses, but was willing to recognize the necessity for financial firms to honor their contracts.
The tax bill continues in that same vein. The firms are allowed to honor their contracts by paying the bonuses. Nonetheless, the United States recoups the public funds with a tax because Congress intended those funds to address the financial crisis, not to enrich individuals.
March 23, 2009 3:34 PM | Reply | Permalink
"...there is no legislative history that suggests Congress wanted these funds used to pay bonuses." You mean other than:
"Congress provided an exception allowing TARP recipients to make bonus payments required by existing contracts."
Which now constitutes "legislative history." Also, since "Congress provided an exception allowing TARP recipients to make bonus payments required by existing contracts" it's hard for them to now argue that TARP recipients making bonus payments required by existing contracts was not one of the "intended purposes." As a matter of fact, the only members of Congress who can claim your argument are those who voted for the TARP but against the stimulus package (since they all had plenty of time to read the stimulus bill and Obama went through it "line by line.")
March 23, 2009 3:46 PM | Reply | Permalink
You simply restated your argument without addressing the points that counter it: (1) there is no language in the TARP legislation that suggests Congress intended this money go to pay bonuses; (2) Congress expressly limited use of TARP funds for paying bonus in the stimulus bill; and (3) the exception for existing contracts comports with allowing the firms to pay bonuses under existing contracts then recovering the funds through taxation. I see no plausible argument that Congress intended these funds to be used for executive bonuses. If the argument over the constitutionality of comes down to that question, then I think upholding the bill is a slamdunk.
Unfortunately, I don't think it comes down to that question. I think the question is whether Congress actually acted with an intent to punish these individuals, regardless of whether the bill serves a valid purpose. Another question is whether attempting to recoup funds is even a valid (non-punitive) purpose. Although I find it a perverse concept of punishment, one can certainly make the argument that an attempt to recoup funds is punitive because restitution (i.e., recouping funds) is often part of the punishment in criminal proceedings. I also suspect there's a decent question about whether Congress has authority to tax incomes retroactively; all property was once income, so expanding Congress's 16th Amendment authority to include retroactive income taxation could eviserate the takings clause.
In conclusion, I agree that there are significant constitutional questions about this bill. I don't think there's a serious question about Congress's intentions re: use of the TARP funds though.
March 23, 2009 4:11 PM | Reply | Permalink
"I see no plausible argument that Congress intended these funds to be used for executive bonuses." Dude, they included specific language in the stimulus bill that allowed it...the same people who you claim didn't inted it. That's like saying Congess approver a law allowing public nudity, then being outraged that there's naked people walking around.
March 23, 2009 4:20 PM | Reply | Permalink
Dude! As I repeatedly explain above (and you keep ignoring) that's NOT what happened.
Using your choice of public "nudity," here is an analogy that fits what happened: Congress passes legislation purchasing businesses that rent beaches. Congress then prohibits the business from renting the beaches to nudists, but leaves a loophole for existing leases because Congress doesn't want the nudists to be able to sue the businesses. Congress then closes the loophole by passing general legislation to prohibit nudity on government-owned beaches.
Arguing from that chain of events that Congress intended to allow public nudity would be silly. Just as your argument that Congress intended the TARP funds to pay executive bonuses is equally silly.
March 23, 2009 4:36 PM | Reply | Permalink
Still waiting for you to list three reasons why you're not an asshole.
March 23, 2009 12:11 PM | Reply | Permalink
You got me there. I can't make a single argument against that. It smells.
March 23, 2009 12:22 PM | Reply | Permalink
How much of the retention bonus for AIG-FP will be subject to the 90% tax? This tax won't cover people residing in the UK.
March 23, 2009 11:24 AM | Reply | Permalink
Come on...you don't really think this is about actually recouping money, do you?
March 23, 2009 11:38 AM | Reply | Permalink
No, but if only 20%(?) of the employees reside and pay taxes in the US, congress can't make the claim that the bill will recover most of the retention bonus.
March 23, 2009 11:43 AM | Reply | Permalink
Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke to be more of a test of political capital for Geithner than an AIG frustration-fest.
I thought everything Geithner did, said, didn't do or didn't say was a test of political capital for him?
March 23, 2009 11:41 AM | Reply | Permalink
In that case he wouldn't have any capital left.
March 23, 2009 11:44 AM | Reply | Permalink
Given the extent of breathless negative reporting over Geithner that's taken place over the last month, he didn't start with any capital.
March 23, 2009 11:54 AM | Reply | Permalink
Geithner doesn't need capital, he has Obama's capital and Obama has plenty. McCain coming out in support of Geithner will help calm things down. If the Republicans go after Geithner, they will pay the price in public opinion because Geither hasn't hardly had enough time to get fully informed, much less be held accountable for this mess.
March 23, 2009 12:01 PM | Reply | Permalink
Doesn't need it? He's the salesperson for the cash-4-trash project.
March 23, 2009 12:06 PM | Reply | Permalink
Obama is the president not Geithner. Obama decides policy and Geithner carries it out.
March 23, 2009 12:14 PM | Reply | Permalink
I want it noted for the record that I thought the tax-em-till-it-hurts AIG lbonus clawback law may be a an unconstitutional bill of attainder, and I was disagreed with by the editor and publisher here, who dismissed the point by suggesting that bills of attainder are largely related to criminal matters.
If Tribe is correct that maybe this is an unconstitutional bill of attainder, I demand to receive one metaphorical six pack of Josh's favorite beer sent to me by e-mail.
March 23, 2009 12:48 PM | Reply | Permalink
You can take the beer with you on vacation, and use it to assuage your pain when Memphis GOES DOWN.
March 23, 2009 12:50 PM | Reply | Permalink
Not likely to happen.
March 23, 2009 1:03 PM | Reply | Permalink
I was in Destin on the beach for a week or I would've backed you up on your initial argument (not really sure if that helps alot around here though).
March 23, 2009 12:58 PM | Reply | Permalink
As I've read Professor Tribe's comments, they are more nuanced than your characterization. Before seeing the House Bill, Professor Tribe opined that this tax could be imposed in a constitutional way (i.e., in a way that isn't an attainder). After more closely examining the Bill (and presumably the legislative process that produced it), Professor Tribe now opines that comments made by legislators make it difficult to argue that this particular bill isn't an attainder.
I think that the Senate could cure that problem by building a legislative record to support the valid (i.e., non-punitive) purposes of the bill and by amending the bill to make it better serve those valid purposes. Courts give a Senate Report on the bill more weight than statements by individual legislators.
March 23, 2009 2:49 PM | Reply | Permalink
I'll give you three unintended consequences. Or, at least I HOPE they're unintended.
1. It punishes tens of thousands of honest, hard working employees who have done nothing wrong.
2. It would drain talent from the very banks the government is presumably trying to help. I know quite a few people whose effective wage starting today would be zero.
3. It would create a chilling precedent opening the way for Congress to use the tax code to punish ANY politically unpopular group with brand new tax brackets. Ever read the poem "First they came"?
When the Nazis came for the communists,
I remained silent;
I was not a communist.
Then they locked up the social democrats,
I remained silent;
I was not a social democrat.
Then they came for the trade unionists,
I did not speak out;
I was not a trade unionist.
Then they came for the Jews,
I did not speak out;
I was not a Jew.
When they came for me,
there was no one left to speak out for me.
March 23, 2009 2:38 PM | Reply | Permalink
QuiteAlarmed says:
"Professor Tribe now opines that comments made by legislators make it difficult to argue that this particular bill isn't an attainder.
I think that the Senate could cure that problem by building a legislative record to support the valid (i.e., non-punitive) purposes of the bill and by amending the bill to make it better serve those valid purposes. Courts give a Senate Report on the bill more weight than statements by individual legislators."
But no matter how much lipstick you put on the pig, it's still a pig. Sure, you can try to thread this thing through the set of semi-principles that come out of the unfortunate precedents set by the Courts. But if ever Congress has shown a flagrant disregard for the spirit of the document, and if ever there was a need reaffirm the notion of a "living, breathing" Constitution, this is it.
March 23, 2009 3:32 PM | Reply | Permalink
Only if you see something fundamentally wrong about Congress taking back public funds that went to executives earning over $125K (or $250K filing jointly). Personally, I don't see anything wrong with that. I think public funds can be better used than paying a dole to people with six-figure salaries.
March 23, 2009 4:20 PM | Reply | Permalink