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House Passes 90% Tax on Bonuses

Posted on 20 Mar 2009

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The House overwhelmingly approved a 90 percent tax on bonuses at American International Group Inc. (AIG) and other companies receiving bailout funds.

The Senate plans to vote next week on steep levies on employee bonuses, proposing to place a 70 percent tax on companies that got federal money. Half that amount would be paid by employees, half by the companies.

The 328-93 House vote came amid a national outcry over $165 million AIG paid in bonuses last week after receiving $173 billion in bailout funds as part of the government’s efforts to stabilize credit markets. President Barack Obama said he was “stunned” by the bonuses and vowed to recoup the money. Nineteen state governments have begun probes of the AIG bonuses.

“Paying excessive bonuses to the same group of folks that helped get us into this crisis is simply unacceptable,” Senate Finance Committee Chairman Max Baucus said in a statement. “Millions of Americans continue to struggle to get by, counting their dollars, and Congress needs to do the same.”

The House measure would cover companies receiving 75 percent of federal bailout funds, according to the Ways and Means Committee. The Senate proposal would affect a larger pool of workers and the chamber may vote on it next week, said its primary sponsor, Baucus, a Montana Democrat.

The House bill passed yesterday would affect employees earning more than $250,000 who received bonuses from companies that received more than $5 billion in aid from the Troubled Asset Relief Program.

“These people are getting away with murder,” said House Ways and Means Committee Chairman Charles Rangel of New York. “They’re getting paid for the destruction they’ve caused to our communities.”

The financial industry is counting on the slower pace of the Senate to give it a chance to mount a defense, according to a Washington-based representative of the financial services industry. With a vote expected quickly next week, there may be little time to make a strong case.