Thursday, March 19, 2009

Don't use the tax code as a political weapon

I have no problem with seeking a legal remedy to take the bonus money back out of AIG's corporate hide, but applying punitive confiscatory taxes against individuals could set a very dangerous precedent.

As a result of extraordinary abuses of the public trust by companies rewarding employees with excessive compensation while receiving billions in taxpayer assistance, Congress introduced legislation to recover taxpayers’ dollars.

• The bill would apply a separate income tax rate of 90 percent to bonuses received by individuals from companies which have received at least $5 billion from TARP. It would also apply to bonuses paid by Fannie Mae and Freddie Mac.

• For this purpose, bonuses will be defined as any retention payment, incentive payment, or other bonus which is in addition to regular employee compensation payable on a periodic basis.

• The special tax rate only would apply to individuals and families with overall income (including income other than bonuses) in excess of $250,000.

• The bill applies to payments received after December 31, 2008.
Using the tax code as a political weapon strikes me as a very bad idea that positively screams "unforeseen consequences."

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