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U.S. House Passes 90 Percent Tax on Employee Bonuses

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sciwizam

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Oct 22, 2004
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Bloomberg Link

March 19 (Bloomberg) -- The U.S. House, moving swiftly in response to public outrage, voted to impose a 90 percent tax on employee bonuses at American International Group Inc. and other companies getting at least $5 billion in taxpayer bailout funds.

The 328-93 vote cleared a two-thirds vote hurdle amid a national furor over $165 million in bonuses paid last week by AIG after it received $173 billion in federal bailout funds. The measure would cover 75 percent of companies that receive federal bailout funds, according to the House Ways and Means Committee.

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

Voting for the measure were 243 Democrats and 85 Republicans; six Democrats and 87 Republicans voted against it. A two-thirds margin was required under a fast-track procedure that barred amendments by opponents.

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. The tax wouldn?t apply to commissions or fringe benefits.

Senate Finance Committee Chairman Max Baucus of Montana plans to introduce his proposal later today.

?Tighten Their Belts?

?We just want to recover the taxpayers? money for them,? said Democratic Representative Steve Israel of New York. Those who got the bonuses ?are just going to have to tighten their belts just like the rest of America,? he said.

House Republican Leader John Boehner of Ohio opposed the measure, demanding to know who added language to the $787 billion economic stimulus bill last month that protected executive bonuses that were promised before Feb. 11.

Boehner called the measure a ?political charade? and said, ?Why don?t we just get it all 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.

Senator Judd Gregg, a New Hampshire Republican, predicted Congress?s efforts to rescind the bonuses through higher taxes would be thrown out in court. He said the legislation violates the Constitutional ban on bills of attainder, which restricts lawmakers? ability to punish individual Americans.

?Do It Legally?

?It?s basically targeted on a small group of people,? Gregg said. He also said the bill may exceed lawmakers? power to rewrite existing contracts. He said ?of course? the government ought to try to rescind the bonuses ?but we?ve got to do it legally.?
Here's a link to the actual text of the bill. Link

It's about 1 page of legislation, an easy read. Something interesting is the effective date part.

Effective Date.--This section shall apply to disqualified bonus
payments received after December 31, 2008, in taxable years ending
after such date.
So what happens to the $3-4 Billion dollar bonuses paid out by Merrill Lynch during December of 2008 just before it was bought out by Bank of America? Bank of America is a recipient of TARP funds.
 

sciwizam

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Oct 22, 2004
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Err, looks like there were other threads created while I was posting this, please close.
 

aphex

Moderator<br>All Things Apple
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Jul 19, 2001
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So what happens to the $3-4 Billion dollar bonuses paid out by Merrill Lynch during December of 2008 just before it was bought out by Bank of America? Bank of America is a recipient of TARP funds.
I don't think you can retroactively tax bonuses from last year. I may be wrong, but that seems to be why they chose Jan 1st, 2009 as the start date.
 

Craig234

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May 1, 2006
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The titls is also inaccurate - it says all bonuses, when it should say ones from government bailout funds.
 
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