Yesterday the House of Representatives passed H.R. 1586, a bill that would institute a 90% tax rate on employee bonus payments from firms taking more than $5 billion in TARP money. The bill received overwhelming bi-partisan support, resulting in a vote of 328-93. The Senate seems likely to support a similar bill, and the President has expressed interest in signing something along these lines. The Hose editorial board soundly opposes this capricious, retroactive, and possibly unconstitutional seizure of property. H.R. 1586 has the following troublesome provisions:
- The bill is a reaction to the excessive bonuses paid to executives at the morally and fiscally bankrupt insurance giant, AIG. However, by including in its reach employees at any firm accepting more than $5 billion in TARP money, the bill extends the punitive provisions to even low-level employees at basically every major American financial institution.
- The bill covers banks like JPMorgan and Goldman Sachs that took TARP money at the request of the Treasury. Punishing these healthy and helpful firms now seriously undermines any future effort on the part of the Treasury to orchestrate financial relief. No CEO in his/her right mind will participate in Treasury-coordinated programs when such abusive retroactive costs are a possibility.
- Several prominent Hose supporters will be ensnared in this unsavory wealth-grab. We look out for our own.
- Americans deserve a certain degree of tax predictability. Most of the money involved here was paid out in January of 2009 (bonus season for banks). People have spent the money, invested it, paid down mortgages or other debt, etc. Many of these people will have real trouble coming up with funds to pay this retroactive tripling of their taxes.
- This represents an unwanted and unpleasant distraction from March Madness.
The Hose editorial board urges you to contact your Senators and tell them to vote NO on the Senate version of H.R. 1586.
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