The bill is a response to the national furor that erupted this week when it was learned that American International Group Inc. (AIG) paid $165 million in bonuses to 4,600 employees, including many in the financial products unit whose investments brought the company to the brink of bankruptcy.
“I expect it to pass in overwhelmingly bipartisan fashion,” House Majority Leader Steny Hoyer, a Maryland Democrat, told reporters yesterday in Washington. House Speaker Nancy Pelosi, a California Democrat, said, “The American people are very upset about what they’ve heard about bonuses.”
Companies covered by the legislation have received 75 percent of federal bailout funds, according to the House Ways and Means Committee.
“We go far beyond AIG, Citibank, Freddie Mac, Fannie Mae and others,” said committee Chairman Charles Rangel, a New York Democrat. “This is not going to happen again, the light is flashing and letting them know that America won’t take it.”
House Republican Leader John Boehner of Ohio denounced the Democrats’ bill as a “sham” effort to recover the money and said, “We don’t want 90 percent of it back, we want all of it back.” He said Republicans offered an alternative requiring the Treasury secretary to devise a plan within two weeks to get all the bonus money back.
The bill was drafted yesterday as AIG Chief Executive Officer Edward Liddy told a House Financial Services subcommittee that he asked employees who got bonuses over $100,000 to repay half. AIG so far has received $173 billion in federal bailout funds.
The 90 percent tax would apply to people with overall income exceeding $250,000, including bonuses. The tax would apply to bonus payments made after Dec. 31, 2008, and it would cease when the U.S. government’s investment in the company fell below $5 billion. The tax wouldn’t apply to any bonus
returned to a company.
Senate Proposal
The Senate is writing its own measure that would impose a 70 percent excise tax on the bonuses, split between the company and employee. That tax would be collected from foreign workers by making the company responsible for paying the employee’s 35 percent excise tax if the levy couldn’t be collected using normal withholding in place under existing tax treaties, according to a description released by the Senate Finance Committee.