# Democrats Pass 90% tax on AIG bonuses **URL:** \ **Category:** Great Debates\ **Created:** [March 19, 2009, 7:06pm UTC](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058 "2009-03-19T19:06:44Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![Diogenes\_the\_Cynic](https://avatars.discourse-cdn.com/v4/letter/d/e99b99/32.png) [@Diogenes\_the\_Cynic](https://boards.straightdope.com/u/Diogenes_the_Cynic)\ **Post date:** [March 19, 2009, 8:48pm UTC](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058/41 "2009-03-19T20:48:38Z")
It’s bonuses that are being taxed, not salaries, and let’s not compare these AIG parasites to people that work for a living, ok? And if their companies can’t pay their bonuses, that’s not my problem. Why should I have to subsidize them? ---
**Author:** ![Cliffy](https://avatars.discourse-cdn.com/v4/letter/c/59ef9b/32.png) [@Cliffy](https://boards.straightdope.com/u/Cliffy)\ **Post date:** [March 19, 2009, 8:51pm UTC](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058/42 "2009-03-19T20:51:31Z")
> [@Whack-a-Mole](#): > > Once I have an agreement to do “X” work for “Y” compensation then I am due “Y” compensation once I have performed “X” work. > > If after the fact someone thinks it is bogus I got paid “Y” tough luck. The agreement was struck and the terms met. That’s not at all what’s going on here. The employees did work for AIG. It’s not AIG who is paying the bonuses, it’s the federal taxpayer. Without the taxpayer’s assistance, AIG would have been bankrupt before the new year and all those employees would get _nothing_ – no bonus, and not their salary either. This is why **Sam** ’s objection that these employees make the bulk of their income through bonuses holds no water. If it weren’t for the bailout, they wouldn’t get the bonuses from private funds – they’d be unemployed. Moreover, the bonuses at issue were not bonuses for good performance, or any performance. They were “Retention bonuses” that were paid for anyone who was still in the job at the end of the year (and apparently 11 people who weren’t). –Cliffy ---
**Author:** ![Squink](https://avatars.discourse-cdn.com/v4/letter/s/b5e925/32.png) [@Squink](https://boards.straightdope.com/u/Squink)\ **Post date:** [March 19, 2009, 8:54pm UTC](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058/43 "2009-03-19T20:54:43Z")
> [@Sam\_Stone](#): > > **Democrats Pass 90% tax on AIG bonuses** [Among Republicans, 87 voted No, 85 voted Yes, and six did not vote.](http://tpmdc.talkingpointsmemo.com/2009/03/house-passes-the-aig-bonus-tax.php) Sounds to me like Republicans offered this bill some true bipartisan support. Sure the GOP’s deeply split here, but this vote shows a real improvement in their ability to get along with the majority. ---
**Author:** ![begbert2](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/begbert2/32/3357_2.png) [@begbert2](https://boards.straightdope.com/u/begbert2)\ **Post date:** [March 19, 2009, 8:54pm UTC](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058/44 "2009-03-19T20:54:54Z")
> [@Sam\_Stone](#): > > I imagine the kind of person who could really be hurt by this would be a regional manager who has a base salary of maybe $125,000, but who could expect a bonus of another $200,000 if he hit his numbers for the year. His base salary alone would probably make him less well paid than some of the sales people under him. He’s working for the bonus, not the salary. So he makes his numbers, and he’s going to earn $325,000 for his work last year. Except now congress is going to tax his bonus at 90%, and suddenly the manager is making less money than his employees. Can anybody clarify to me whether the $250,000 lower limit on family incomes for this tax being applied comes before or after the bonus is included? ---
**Author:** ![magellan01](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@magellan01](https://boards.straightdope.com/u/magellan01)\ **Post date:** [March 19, 2009, 8:55pm UTC](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058/45 "2009-03-19T20:55:31Z")
> [@Sam\_Stone](#): > > And in the credit where credit is due dept: Charles Rangel came out against this, saying it smacks too much of political retribution. Good for him. I read an article in which Rangel explained that community baks that received bailout money would be excluded form these taxes. How is that justifiable? I mean, AIG itself isn’t being hit, it’s the employees themselves. So if a community bank employee makes over $250k and he gets a bonus, why should that be viewed and differently than an employee from a bigger bank, or AIG. In my view IF they have the law, it should apply to everyone who fits the financial parameters. More scummy action from congress. I wonder how Maxine Waters (who owns stock in a community bank) and others who either havestock in said banks or represent ares where these banks are voted on that particular aspect. I wonder… ---
**Author:** ![Gangster\_Octopus](https://avatars.discourse-cdn.com/v4/letter/g/a8b319/32.png) [@Gangster\_Octopus](https://boards.straightdope.com/u/Gangster_Octopus)\ **Post date:** [March 19, 2009, 8:56pm UTC](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058/46 "2009-03-19T20:56:17Z")
> [@yanceylebeef](#): > > I know it’s just populist grandstanding, and chances are we will never see this money again, but dammit if I don’t love this. > The really funny part is the Republicans don’t know how to act… > WARNING. Lefty site. > > [Here](http://www.dailykos.com/storyonly/2009/3/19/710574/-Boss-Limbaugh-short-circuits-the-GOP-brain)is a great example. > > WARNING. Lefty site. I’m a frequenter of DKos, but I think they are stretching this. The quote makes sense in that the Congressperson is saying we want to recover 100% of the $170 billion and this law does not do anything that helps advance that goal. One thing is certain, this will end up in court. ---
**Author:** ![Sitnam](https://avatars.discourse-cdn.com/v4/letter/s/6a8cbe/32.png) [@Sitnam](https://boards.straightdope.com/u/Sitnam)\ **Post date:** [March 19, 2009, 8:56pm UTC](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058/47 "2009-03-19T20:56:22Z")
Is there some legal loophole that kept if from becoming a 100% tax? With all this public outrage stopping at 90% doesn’t really make a lot of sense. ---
**Author:** ![jayjay](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jayjay/32/6765_2.png) [@jayjay](https://boards.straightdope.com/u/jayjay)\ **Post date:** [March 19, 2009, 8:59pm UTC](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058/48 "2009-03-19T20:59:44Z")
> [@Sam\_Stone](#): > > Could not your logic be applied to the union workers at GM? The UAW went through rounds of negotiating to cut the contract salaries before the bailout. This is no comparison. ---
**Author:** ![Gangster\_Octopus](https://avatars.discourse-cdn.com/v4/letter/g/a8b319/32.png) [@Gangster\_Octopus](https://boards.straightdope.com/u/Gangster_Octopus)\ **Post date:** [March 19, 2009, 8:59pm UTC](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058/49 "2009-03-19T20:59:59Z")
> [@Cliffy](#): > > That’s not at all what’s going on here. The employees did work for AIG. It’s not AIG who is paying the bonuses, it’s the federal taxpayer. Without the taxpayer’s assistance, AIG would have been bankrupt before the new year and all those employees would get _nothing_ – no bonus, and not their salary either. This is why **Sam** ’s objection that these employees make the bulk of their income through bonuses holds no water. If it weren’t for the bailout, they wouldn’t get the bonuses from private funds – they’d be unemployed. > > Moreover, the bonuses at issue were not bonuses for good performance, or any performance. They were “Retention bonuses” that were paid for anyone who was still in the job at the end of the year (and apparently 11 people who weren’t). > > –Cliffy Which is why I think the legality of this is very similar to the windfall profits tax, when the windfall is because of actions the governement has taken. ---
**Author:** ![ElvisL1ves](https://avatars.discourse-cdn.com/v4/letter/e/5daacb/32.png) [@ElvisL1ves](https://boards.straightdope.com/u/ElvisL1ves)\ **Post date:** [March 19, 2009, 9:05pm UTC](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058/50 "2009-03-19T21:05:42Z")
> [@Sam\_Stone](#): > > In the end, this is yet another reason why bailouts are a bad idea. Let the company go into bankruptcy, where there are established rules for dealing with things like employment contracts. So it would have been better for these people to have been on the street with no money at all than to give them taxpayer money as a reward for failure? I think we can agree on _that_. ---
**Author:** ![Gangster\_Octopus](https://avatars.discourse-cdn.com/v4/letter/g/a8b319/32.png) [@Gangster\_Octopus](https://boards.straightdope.com/u/Gangster_Octopus)\ **Post date:** [March 19, 2009, 9:07pm UTC](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058/51 "2009-03-19T21:07:55Z")
> [@Sitnam](#): > > Is there some legal loophole that kept if from becoming a 100% tax? With all this public outrage stopping at 90% doesn’t really make a lot of sense. I think they are leaving some room for state taxes. ---
**Author:** ![Whack-a-Mole](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/whack-a-mole/32/141_2.png) [@Whack-a-Mole](https://boards.straightdope.com/u/Whack-a-Mole)\ **Post date:** [March 19, 2009, 9:08pm UTC](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058/52 "2009-03-19T21:08:30Z")
> [@Cliffy](#): > > That’s not at all what’s going on here. The employees did work for AIG. It’s not AIG who is paying the bonuses, it’s the federal taxpayer. Without the taxpayer’s assistance, AIG would have been bankrupt before the new year and all those employees would get _nothing_ – no bonus, and not their salary either. This is why **Sam** ’s objection that these employees make the bulk of their income through bonuses holds no water. If it weren’t for the bailout, they wouldn’t get the bonuses from private funds – they’d be unemployed. > > Moreover, the bonuses at issue were not bonuses for good performance, or any performance. They were “Retention bonuses” that were paid for anyone who was still in the job at the end of the year (and apparently 11 people who weren’t). > > –Cliffy By that measure any publicly traded company is paying their employees with other people’s money. That does not change the fact it it up to the _company_ to determine compensation. They do not go to the shareholders and get approval for every compensation package. If the shareholders dislike what is going on then they boot the CEO and get a new one who they think will run things more to their liking. At the end of the day though a contract is a contract. As long as the employee met the terms of that contract then they are entitled to the agreed upon compensation. This is changing the terms after the fact. Again I am among the pissed off public at all of this but as shareholders shouldn’t our anger be directed and the goofs who allowed such contracts to be written? People like Bernanke and Dodd? If the contracts were in some fashion necessary then it is incumbent upon them to tell us why that is so. My sense is they would agree it was highly distasteful but there were rational reasons they felt it necessary. That or it is the good ol’ boys club and they are scratching each others’ backs in which case fire the lot of them. Oh…I should add that I think anger directed at these finance guys, who dug this hole and then held everyone over a barrel to extract MORE outrageous payments to get them to fix their own mess, is appropriate too. Those people are despicable. ---
**Author:** ![BMax](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bmax/32/4267_2.png) [@BMax](https://boards.straightdope.com/u/BMax)\ **Post date:** [March 19, 2009, 9:09pm UTC](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058/53 "2009-03-19T21:09:08Z")
> [@Sam\_Stone](#): > > Did you read my last message? The bonuses in question do NOT apply to the top management of AIG. The top 7 executives and the next 50 highest-paid employees had already agreed to forego their bonuses. This tax will be applied to the other 2,000 to 7,000 employees in the bonus program at AIG, which means people all the way down to the office manager level. > > I imagine the kind of person who could really be hurt by this would be a regional manager who has a base salary of maybe $125,000, but who could expect a bonus of another $200,000 if he hit his numbers for the year. His base salary alone would probably make him less well paid than some of the sales people under him. He’s working for the bonus, not the salary. So he makes his numbers, and he’s going to earn $325,000 for his work last year. Except now congress is going to tax his bonus at 90%, and suddenly the manager is making less money than his employees. > > Now imagine you need a new manager because this one quits in outrage and goes to work for a non-bailout company. How many of those sales people are going to be willing to step up to the job? > > It also creates an artificial distinction between those who earn their living mostly through bonuses vs those who simply draw high salaries. In my company, if you’re in the ‘sales’ track, you make most of your income through commissions and bonuses. If you’re in the engineering track, you can make the same amount of money, but it comes through salary alone. Why should the sales guys be punished, but not the engineers or lawyers or other professionals? > > This kind of demagoguery is immensely destructive, because it leads to rash actions carried out in anger instead of what makes the most sense economically. I understand the anger at these bailouts, and the frustrations of people seeing wealthy people get bonuses when they’re out of work, but it’s the height of idiocy to give billions of dollars of taxpayer money to company to keep them afloat, and then to excoriate them in public and threaten their assets and frighten off their best employees. You want to see taxpayer waste? How about if after all those billions of dollars spent AIG goes under because it becomes an economic pariah due to the grandstanding of Congress and its use of punitive taxation to extract its pound of flesh? Considering that the median household income in the US is somewhere around $48,000 annually, most of us don’t really have any sympathy for some fatcat ‘earning’ a $200,000 bonus, and said bonus being paid out of the pockets of us $48,000 earners. Especially when his company’s incompetence cost us our $401k, and this after our pensions were discontinued and given to upper management in the form of yearly bonuses over the last couple decades. Why again should my income (now around $30,000 since I was laid off from my $44,000 job last June), be given to some fatcat who ‘earns’ several times what I do? ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [March 19, 2009, 9:15pm UTC](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058/54 "2009-03-19T21:15:09Z")
So we’re down to just punishing the rich then, huh? > [@ElvisL1ves](#): > > So it would have been better for these people to have been on the street with no money at all than to give them taxpayer money as a reward for failure? I think we can agree on that. It would have been better to deal with it all under a framework that has established rules everyone can understand. Those bonuses might still have been paid out, or they might not have - it would depend on the restructuring plan and legal frameworks agreed to under the bankruptcy laws. This is something investors could understand and plan for, and people doing business with AIG could understand. But this current situation, where bailout companies just get knocked around at the whim of Congress, is ultimately going to be very destructive. Would YOU invest in AIG if you didn’t know where the next hit was going to come from? Would you do business with them? Would you enter into a contract with them in any area where you thought Congress might decide to intervene? Congress’s actions are going to put a big cloud of uncertainty around the companies that receive bailouts, making it harder for them to survive. That’s REALLY throwing good money after bad. The bonuses are chicken feed in comparison to the entire bailout package being lost if AIG goes under anyway, or to the money that will be lost if the government just nationalizes it and then tries to compete in the open market with a company missing its best and brightest people. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [March 19, 2009, 9:17pm UTC](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058/55 "2009-03-19T21:17:49Z")
By the way, are you guys going to show similar outrage at the $1 million bonuses being paid to the executives at [Fannie Mae and Freddie Mac](http://finance.yahoo.com/news/Fannie-plans-bonuses-of-up-to-apf-14679491.html/print)? ---
**Author:** ![Der\_Trihs](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/der_trihs/32/233_2.png) [@Der\_Trihs](https://boards.straightdope.com/u/Der_Trihs)\ **Post date:** [March 19, 2009, 9:18pm UTC](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058/56 "2009-03-19T21:18:24Z")
> [@Sam\_Stone](#): > > So we’re down to just punishing the rich then, huh? Rich people who screwed up so bad they begged a government handout to keep their companies from going under, and decided that a better use for the money was lining their pockets. ---
**Author:** ![Left\_Hand\_of\_Dorkness](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/left_hand_of_dorkness/32/7156_2.png) [@Left\_Hand\_of\_Dorkness](https://boards.straightdope.com/u/Left_Hand_of_Dorkness)\ **Post date:** [March 19, 2009, 9:19pm UTC](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058/57 "2009-03-19T21:19:31Z")
> [@Sam\_Stone](#): > > So we’re down to just punishing the rich then, huh? This isn’t a punishment. This is a reward. That’s MY money those guys are getting. They’ll still be getting 10% of the money. As far as I’m concerned, they’re not entitled to a dime of my money. You tried to play the world’s tiniest violin by pointing out that these guys will barely earn more than a low-six-figure salary. That violin is all kinds of out of tune. If you want to pull on my heartstrings, better make sure they’re connected to my heart. Daniel ---
**Author:** ![ElvisL1ves](https://avatars.discourse-cdn.com/v4/letter/e/5daacb/32.png) [@ElvisL1ves](https://boards.straightdope.com/u/ElvisL1ves)\ **Post date:** [March 19, 2009, 9:22pm UTC](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058/58 "2009-03-19T21:22:46Z")
> [@Sam\_Stone](#): > > So we’re down to just punishing the rich then, huh? I thought you Randians \*disdained \*parasitism? ---
**Author:** ![BMax](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bmax/32/4267_2.png) [@BMax](https://boards.straightdope.com/u/BMax)\ **Post date:** [March 19, 2009, 9:23pm UTC](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058/59 "2009-03-19T21:23:08Z")
> [@Sam\_Stone](#): > > So we’re down to just punishing the rich then, huh? No, just the rich who pocket the federal money that was given them to keep their company operating. Is it really that hard for you to understand? ---
**Author:** ![Cliffy](https://avatars.discourse-cdn.com/v4/letter/c/59ef9b/32.png) [@Cliffy](https://boards.straightdope.com/u/Cliffy)\ **Post date:** [March 19, 2009, 9:25pm UTC](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058/60 "2009-03-19T21:25:33Z")
> [@Sam\_Stone](#): > > By the way, are you guys going to show similar outrage at the $1 million bonuses being paid to the executives at [Fannie Mae and Freddie Mac](http://finance.yahoo.com/news/Fannie-plans-bonuses-of-up-to-apf-14679491.html/print)? Fannie and Freddie employees will be subject to this tax as well, chief. Moreover, Fannie and Freddie aren’t the shops that brought us to the economic crisis in which we now find ourselves. AIGFP is. –Cliffy [Previous page](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058.md?page=2) [Next page](https://boards.straightdope.com/t/democrats-pass-90-tax-on-aig-bonuses/490058.md?page=4)