U.S. House to Vote on Tax on AIG Bonuses
The bill would impose a 90 percent tax on bonuses for executives whose incomes exceed $250,000. The tax would apply to executives of any company that received at least $5 billion in government bailout money.
American International Group Inc. has received up to $180 billion in emergency aid and is now about 80 percent owned by the U.S. government.
The $165 million in bonuses paid to AIG executives, many of them in the high-flying unit whose risky investments would have toppled the insurance giant if not for federal intervention, sparked outrage and calls for action to recoup taxpayer money.
“The American people are very upset about what they have heard about bonuses being paid by institutions which received taxpayer funds,” House Speaker Nancy Pelosi told reporters.
House Democratic Leader Steny Hoyer said he expected the bill to pass overwhelmingly. It is being rushed to the House floor under an expedited procedure and will need a two-thirds majority to pass.
House Republicans, whose support will be needed for passage, have not yet commented on the bill.
The Senate is working on a somewhat different approach. A bill unveiled Tuesday would impose a 70 percent tax on the bonuses, with the tax bill split equally between the company and the bonus recipient.
AIG’s chief executive, Edward Liddy, told a congressional panel Wednesday he asked employees receiving more than $100,000 in bonuses to repay at least half.
Liddy, who took over as head of AIG in September when the government stepped in with the first of a series of rescues, said he was trying to prevent the insurance behemoth from collapsing when he allowed the bonuses.
‘UNINTENDED CONSEQUENCES’
Hoyer said the House was working on other measures to ensure the government recouped the bonus money.
The House Judiciary Committee Wednesday approved a bill that would authorize the U.S. attorney general to seek repayment of excessive compensation from employees of companies that have received more than $10 billion in federal aid.
The measure, approved by voice vote by the Judiciary Committee, also would allow the attorney general to restrict future payments to executives to 10 times the average non-management wages at companies getting federal aid.
“The legislation before us represents an effort to safeguard taxpayer funds and rein in out-of-control compensation and bonus abuses by companies that have used federal financial assistance to avoid bankruptcy,” said Representative John Conyers, the panel chairman.
Some Republicans praised the concept of trying to recoup the bonuses but questioned the method, expressing concern it runs afoul of U.S. law and potentially the U.S. Constitution.
“Congress has let expediency override common sense,” said Representative Lamar Smith, the top Republican on the Judiciary Committee.
“Congress already has learned the hard way the unintended consequences of rushing to legislate without adequate expert testimony and debate but that’s exactly what we are doing now.”
Some Democrats also questioned the constitutionality of the legislation.
(Additional reporting by Jeremy Pelofsky; Editing by John O’Callaghan)