Maybe there is a voice of reason in Washington after all. Pres. Obama has made it clear that he does not think the proposal by the House of Representatives to tax the bonuses of bank executives at institutions receiving more than $5 billion in bailout money at 90 percent is constructive lawmaking.
He stated throughout last week and Sunday night on 60 Minutes that he does not like the idea of "passing laws that are just targeting a handful of individuals" or using the tax code to punish people, implying it would be unconstitutional. He also said he expects the Senate to craft a more acceptable version of the bill that he would possibly sign.
What AIG did might have been necessary in its eyes to fulfill its "contractual obligations" to executives, but even CEO Edward Liddy admitted it might not have been the best PR move by the company (now that's an understatement), which is now 80 percent owned by the American taxpayers and government. Still, the idea of disincenting executives in such a manner as proposed by the House could have dire consequences for the financial services industry at large. Sure, they say it would just apply to AIG and the banks, but knowing the way Congress works, don't be surprised if it spread to the rest of the business sector-healthcare, airlines, manufacturing, etc. Case in point: the alternative minimum tax (AMT). Wasn't the AMT just supposed to target "rich people" when Congress originally passed that?
Look, giving bonuses to people is fine, provided they perform and produce. But if you tell people they're going to be taxed at an even greater rate just because they happen to be in the wrong industry, how is that going to help anything? How is that going to aid the recovery of our economy and the financial services industry? There is a real danger of brain drain in financial services if Congress gets it way. And again, once the House's policies are accepted here, sky's the limit in terms of who else will be subject to their draconian taxation tactics.
Granted, Obama, Geithner and others knew about the AIG bonuses beforehand, but I still applaud Pres. Obama for speaking out against this drastic proposal by the House and for being a voice of reason in Washington. Let's just see if he acts on his words.