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Taxing AIG Bonuses – Constitutional?

March 21, 2009

Democrats are falling over themselves in their rush to decry the retention bonuses paid to AIG executives using bailout funds.  The’ve gone to great lengths to devise a means to recover the funds, including the possibility of a 90% tax on the bonuses that AIG claims they are legally bound to disburse to employees.   While the distribution of taxpayer money in this fashion is unseemly one has to question if Congressional Democrats sponsoring the punitive tax legislation aren’t stretching the limits of their Constitutional authority.  These taxes single out a specific group of  US citizens, those who earn over $250,ooo per year and are awarded bonuses while employed by a company that received at least $5 billion in government bailout funds.  This certainly has 14th Amendment implications but apart from that it also has the smell of a Bill of Attainder – legislation passed to punish a person or persons without trial.

Bills of attainder, ex post facto laws, and laws impairing the obligations of contracts, are contrary to the first principles of the social compact, and to every principle of sound legislation. … The sober people of America are weary of the fluctuating policy which has directed the public councils.  They have seen with regret and indignation that sudden changes and legislative interferences, in cases affecting personal rights, become jobs in the hands of enterprising and influential speculators, and snares to the more-industrious and less-informed part of the community.”  James MadisonFederalist Number 44, 1788

Perhaps the Democrats should go back to embarrassing the recipients into refusing the bonuses.  At least that approach is legal.

Update

Apparently, Pittsburgh Tribune-Review’s editors are of like mind, given this editorial on Sunday.

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