WASHINGTON — Democrats pressed for quick action Thursday on a bill to slap punishing taxes on big employee bonuses from firms bailed out by taxpayers. Republicans called it a legally questionable ploy to paper over Obama administration missteps.
WASHINGTON — Democrats pressed for quick action Thursday on a bill to slap punishing taxes on big employee bonuses from firms bailed out by taxpayers. Republicans called it a legally questionable ploy to paper over Obama administration missteps. "The American people demand protection and that’s what we’re doing today," said Rep. Charles Rangel, a New York Democrat, chairman of the tax-writing House Ways and Means Committee. But Minority Leader John Boehner, an Ohio Republican, called the bill "a political circus" diverting attention from why the administration hadn’t done more to block the bonuses before they were paid. The bonuses, totaling $165 million, were paid to employees of troubled insurer American International Group over the weekend, including to traders in the unit that nearly brought about the company’s collapse. The bonuses have dominated U.S. news for days, outraging Americans who have been seething for months over the government using their tax dollars to bail out mismanaged financial companies. The issue has kept the new administration of President Barack Obama on the defensive and cast doubts on the future of his Treasury Secretary, Timothy Geithner. It also has raised questions about Obama’s ability to push through a second financial rescue plan that he says is needed to revive the sagging U.S. economy. Democratic leaders rushed the bill to the floor under a procedure that requires a two-thirds majority for passage. The numerous Republican complaints about the measure during Thursday’s debate raised questions on whether it would pass. "The Democratic bill brought to the floor today is constitutionally questionable," said Rep. Mike Pence, an Indiana Republican. "It’s obviously a transparent attempt to divert attention away from the truth that Democrats in Congress and this administration made these bonus payments possible." The bill would levy a 90 percent tax on bonuses paid to employees with family incomes above $250,000 at companies that have received at least $5 billion in government bailout money. "We figured that the local and state governments would take care of the other 10 percent," said Rangel. Rangel said the bill would apply to mortgage giants Fannie Mae and Freddie Mac, among others, while excluding community banks and other smaller companies that have received less bailout money. A tax expert said there is plenty of precedent for levying punitive taxes on behavior that lawmakers find objectionable. Robert Willens, a corporate tax lawyer in New York, cited the steep excise taxes levied on money paid to firms to keep them from launching hostile takeover bids, known as "greenmail." "You can write very narrowly tailored laws," Willens said. "And they can do it for bonuses already paid." House Democratic leaders unveiled the bill Wednesday as the head of embattled American International Group Inc., which has received $182 billion in bailout money, testified about $165 million in bonuses paid out in the past week to about 400 employees in its Financial Products unit. Edward Liddy, who was brought in last year by the government to run AIG, told a House subcommittee that the company was contractually obligated to pay the bonuses but that some of the recipients have begun returning all or part of them. Liddy said that on Tuesday, he had "asked those who have received retention payments in excess of $100,000 or more to return at least half of those payments." Some have "already stepped forward and returned 100 percent," he added. In the Senate, the top two members of the Finance Committee on Tuesday announced a bill that would impose a 35 percent excise tax on the companies paying the bonuses and a 35 percent excise tax on the employees receiving them. The taxes would apply to all companies receiving government bailout money, but they are clearly geared toward AIG. President Obama, who took office just under two months ago, told reporters Wednesday that his administration was not responsible for a lack of federal supervision of AIG that preceded the company’s demise. But Obama added, "The buck stops with me." ______ Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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