House votes to tax AIG bonuses amid nationwide protests

WASHINGTON — The House of Representatives voted on Thursday to levy a 90 percent tax on bonuses paid to employees with household incomes exceeding $250,000 a year at companies that have received at least $5 billion in federal bailout assistance.

The 328-93 vote was a not-so-veiled attempt to use the federal tax code to try to recover $165 million in bonuses paid to employees of the American International Group, the ailing global insurance giant that's received $170 billion in taxpayer bailout funds.

The measure, which required a two-thirds majority, passed the House despite the Republican leadership calling the bill a sham and an attempt to hide the fact that a Democrat — Sen. Christopher Dodd of Connecticut, the chairman of the Senate Banking Committee — inserted an amendment in the recently passed stimulus bill that allowed the bonuses to be paid. (Dodd said that he did so at the Treasury Department's request, and Treasury Secretary Tim Geithner acknowledged that Thursday on CNN.)

In the end, however, 85 Republicans voted with Democrats to pass the bill. Only six Democrats voted against it.

"Most all Americans believe that a bonus is something that is paid as a reward for a job well done," said Rep. Charles Rangel, D-N.Y., the chairman of the House Ways and Means Committee, which writes tax law. "Certainly, we don't believe in the House some of the handful of people receiving taxpayers' money for threatening the community in which we live and, indeed, our country and the financial structure of the world — the whole idea that they should be rewarded millions of dollars is repugnant."

The House's action occurred as thousands of people marched outside AIG offices nationwide to register their anger over the bonuses.

In downtown Washington, about 100 people held a boisterous demonstration outside AIG's office on busy K Street — also known as lobbyist row.

Carrying yellow and purple posters, the protestors chanted: "Bailing out bankers, that's so lame, they waste money with no shame!" The demonstrations were held in more than 30 states and organized by the Service Employees International Union.

AIG head Edward Liddy told a House Financial Services Committee subcommittee on Wednesday that he asked bonus recipients to give at least half of their rewards back to the government, but that wasn't enough to satisfy lawmakers.

"We want our money back and we want our money back now for the taxpayers," said House Speaker Nancy Pelosi, D-Calif.

House Minority Leader John Boehner, R-Ohio, called Thursday's vote a legally questionable "circus." He said it would take more than a year to get the AIG bonuses back because the recipients would have to file their income taxes for the government to get the money.

Boehner unsuccessfully pushed an alternative that he said would recover all of the AIG bonuses this year.

Thursday's vote, however, gave Republicans an opportunity to blame the Obama administration — specifically Geithner — for its handling of the matter.

Republican speaker after speaker took to the House floor to note Dodd's amendment and to ask what Geithner knew and when he knew it.

"Congress is now trying to cover-up mistakes by the administration and 'parentless' stimulus language that did nothing to stop the bonuses by imposing a 90 percent tax on the funds," said Rep. Jeb Hensarling, R-Texas. "They are, in the word of the top Democrat on the House tax-writing panel, using the tax code as a 'weapon' to punish behavior with which they don't agree."

The bonus-tax legislation can't become law until the Senate passes it. It's unlikely that the Senate will consider AIG legislation this week, but may get to it by April 3, the start of Congress' spring break.

Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, and Sen. Charles Grassley, the panel's ranking Republican, introduced a measure that would impose a 35 percent excise tax on excessive executive compensation for bonus recipients of companies that receive federal TARP funds.

The Senate is moving more slowly that the House on the bonus issue for two reasons: There's reluctance by some Republicans to use the tax code to go after the bonus money, and some Democrats don't want to draw attention to Dodd's role in the matter.

On CNN, Geithner said that unidentified Treasury staffers worked with Dodd's staff to strengthen language in the legislation against potential legal challenges, including that amendment. Geithner said that he too worked with Dodd on the bill, but didn't take responsibility for authoring the amendment permitting the bonuses.

Senate Majority Leader Harry Reid, D-Nev., said Thursday that he "did not want to talk about it" and declined to discuss how the amendment made it into the stimulus bill.

Separately, Neil Barofsky, the special inspector general overseeing the government's bailout, told the House Ways and Means Committee that he'd investigate the Treasury Department's role in the AIG bonuses.

"In my role as special inspector general and as an individual taxpayer, I, too, am frustrated with these very substantial bonuses, which appear to have been made to those who were responsible for AIG's meltdown," Barofsky said.

(James Rosen contributed to this article.)


Forget the bonuses: AIG can't repay its loans, GAO says

Payback time for AIG: Treasury, Congress go after the bonuses

Congress threatens to tax back bonuses to AIG executives

Obama to seek 'every legal avenue' to block AIG bonuses

Pew poll: Obama's public support is eroding

Greatest threat to Obama spending plan? Democrats

Related stories from McClatchy DC