A 90% Tax on AIG Bonuses: Pressing the Panic Button

Written by Roberta Biros

The AIG Bailout is a mess. It has been a mess. It started during the Bush Administration and it was wrong then ($85 Billion in September of 2008). I’m a firm believer that if a company is failing, it should go into “Chapter 11 Bankruptcy Protection”. Bankruptcy Protection is, after all, a legal way for financially ailing businesses to step back and try to fix their problems. Instead, the Bush Administration threw money at AIG with no strings attached. It was like flushing the money down the toilet.

The Obama Administration came in and perpetuated the problem by making the same mistake again. They gave more money to AIG without strings.

No one in the Obama Administration was complaining about the additional AIG bailout until AIG had the nerve to give bonuses to their executives. AFTER the bonuses were handed out, the outrage started. “How Dare They!” was the general testament. As a knee jerk reaction it was suggested that a “special tax” be applied to get the AIG bonus money back . . . a 90% tax on the bonuses, which was passed in the House last week.

I have problems with the suggestion of a 90% tax on ANYTHING, and the bonuses are no exception. Focusing a tax law on a small group of people in an effort to “punish” is wrong and shouldn’t even be discussed. The people receiving the bonuses are not at fault . . . the government is at fault for having given the money to AIG without strings in the first place. Second, how are we sure that such a law would ONLY target the individuals at AIG and not grow into a 90% tax on other people who didn’t receive government bailout money? The answer is that we CAN’T. The concept is flawed on so many levels that I can’t even begin to site the arguments.

After the tax was announced last week, the White House began to back-pedal. I’ve heard lots of rumors, but I was interested to hear an “official” statement from the President. President Obama was on 60 Minutes last night (3/22/2009). He addressed this issue directly as follows:

“As a general proposition you don’t want to be passing laws that are just targeting a handful of individuals. You want to pass laws that have some broad applicability. And, as a general proposition, I think, you certainly don’t want to use the tax code to punish people”

I’m sorry, President Obama, but your statement is seriously defective. To say “As a general proposition you don’t want to be passing laws that are just targeting a handful of individuals” is like saying “as a general rule you would rather not pass such a law”. That sort of statement leaves some area of speculation and flexibility. The correct response should be “you cannot pass laws that are just targeting a handful of individuals because it is unconstitutional and wrong . . . period.”

This is not a grey area. This is not an issue for discussion and flexibility and negotiation. The entire concept is wrong and it scares a huge percentage of our population by just discussing it. President Obama needs to calm people’s doubts and concerns with a strong and confident confirmation that the administration would NOT support an illegal tactic like this. President Obama needs to evoke confidence by answering questions like this with undoubted clarity. All discussion of this 90% tax needs to stop before the concept itself strikes panic. The Federal Government has made one outrageous mistake after another, and now they want to “press the panic button” to try to get out of it . . . a 90% tax just isn’t the answer.

Employees at AIG are already getting death threats, and the concept of a 90% tax is causing lots of concern and conversation. I fear that we are stepping into a VERY dangerous territory!

This is not an issue of bad decisions by Republicans or bad decisions by Democrats . . . this is an issue of Bad Government by both sides.

As always, just my opinion.
~Roberta Biros, Mercer County Conservatives

My References for your “Reading Enjoyment”:

CLICK HERE – to read about the AIG bailout during the Bush Administration (9/2008)
CLICK HERE – to read about the AIG bailout during the Obama Administration (3/2009)
CLICK HERE – to read about the “outrage” over AIG bonuses
CLICK HERE and HERE – to read about the 90% tax on bonuses that was passed by the House last week
CLICK HERE – to read about Obama’s possible change of heart over the 90% tax
CLICK HERE – to read about the unconstitutionality of the tax law and references to Chapter 11
CLICK HERE – to read about the death threats to AIG employees
CLICK HERE – to read an on-going on-line conversation about the issue