The Illusion of Change

In the wake of the outrage over the lavish Wall Street bonuses, the House of Representatives passed a tax bill designed to punish extravagant executives.

The government wants to tax 90% of the income from the bonuses of companies that received “at least $5 billion in bailout money,” retroactive to January 1, 2009.[i]

The retroactive tax is intended for the bonuses of “traders, executives and bankers” who earned more than $250,000.[ii]

“Employees at 11 institutions – including Goldman Sachs, Bank of America, Citigroup, Wells Fargo, and JP Morgan Chase” are the focus of the legislation.[iii]

The Senate’s version of the bill seeks to tax bonuses from companies that received $100 million in bailout funds.[iv]

American International Group (AIG) instigated the public outrage when it was disclosed that $165 million in bonuses were distributed to 418 of their employees – including “$33.6 million for 52 people who left the failed insurance conglomerate.”[v]

In addition, AIG paid more than $1 million in bonuses to 73 employees who created the financial instruments that caused AIG’s financial crisis.[vi]

The United States government owns almost 80% of AIG because the troubled conglomerate “has received nearly $200 billion in federal bailout funds.”[vii]

President Obama supported the effort to recoup the bonuses. The President wants “Congress to deliver a final product that will serve as a strong signal to the executives who run these firms that such compensation will not be tolerated.”[viii]

AIG executives argued the bonuses were necessary to keep their gifted employees. In addition, AIG did not want to renege on a contract. The beleaguered company was contractually obligated to pay the bonuses. Also, AIG wanted to avoid lawsuits from disgruntled employees.

Former President Bush left an indelible mark on the political culture in the United States. The current AIG bonuses fiasco combines two of his worst features, his poor reading habits and disdain for the Constitution.

Article 1; section 9 of the United States Constitution states, “No Bill of Attainder or ex post facto Law shall be passed.”

An ex post facto law "is passed after an action in order to retroactively change the legal treatment of the action to the disadvantage of the actor.”[ix]

Furthermore, Congress cannot pass laws directed at a group of individuals.

Congress wants to enact a law taxing income after Congress has considered the income to be unfairly earned. The United States government wants to punish federal bailout recipients because the government did not have the foresight, or courage, to insert regulations in the initial federal bailout legislation prohibiting the use of bailout funds for bonuses.

The government is about to engage in a legislative process that could ultimately be declared unconstitutional by the Supreme Court.

Ignorance cannot be the reason Congress and the President are wasting their time pursuing this potentially futile attempt at retroactively restoring justice and fairness.

Enacting laws is their vocation. Our government must know this tax law is potentially unconstitutional. Otherwise, we have elected fools to govern us.

Sometimes politicians are nothing more than carnival barkers. The government’s response to the furor over the bonuses is their way to appease the public. It is an illusion to distract us from their incompetence and greed.

“Money is the mother’s milk of politics,” said Jesses Unruh, the former Speaker of California’s Assembly.

Politicians are as greedy as Wall Street executives because the latter contribute to the political campaigns of the former.

Taxing executive bonuses is a charade to cover up the collusion between Wall Street, the government and the mainstream media.

The federal government issued $700 billion to troubled financial institutions. The Obama administration passed a landmark $800 billion stimulus package to stimulate the national economy. There is $1.5 trillion that is not circulating in the economy. Someone is hoarding money for a special occasion.

It will be interesting to witness, in the midst of a depressed economy, how much money financial institutions contribute towards political campaigns in 2010.


[i] Carl Hulse and David Herszenhorn, “House Approves 90% Tax on Bonuses After Bailouts,” New York Times, March 20, 2009.
[ii] Carl Hulse and David Herszenhorn, “House Approves 90% Tax on Bonuses After Bailouts,” New York Times, March 20, 2009.
[iii] Carl Hulse and David Herszenhorn, “House Approves 90% Tax on Bonuses After Bailouts,” New York Times, March 20, 2009.
[iv] Carl Hulse and David Herszenhorn, “House Approves 90% Tax on Bonuses After Bailouts,” New York Times, March 20, 2009.
[v] Jackie Calmes and Louise Story, “Outcry Builds in Washington for Recovery of A.I.G. Bonuses, New York Times, March 18, 2009.
[vi] Jackie Calmes and Louise Story, “Outcry Builds in Washington for Recovery of A.I.G. Bonuses, New York Times, March 18, 2009.
[vii] Jackie Calmes and Louise Story, “Outcry Builds in Washington for Recovery of A.I.G. Bonuses, New York Times, March 18, 2009.
[viii] Carl Hulse and David Herszenhorn, “House Approves 90% Tax on Bonuses After Bailouts,” New York Times, March 20, 2009.
[ix] Black’s Law Dictionary, Bryan A. Garner, Editor in Chief, West Publishing Company, 1996, page 245.