I have been surprised at the extent of the government’s intervention in the capital markets. But the first time I felt true fear and total astonishment was last week when the House of Representatives passed a bill that would levy a 90% income tax on AIG employees who received bonuses. As taxpayers who have invested heavily in the AIG bailout, we all have every right to be angry with how the company has been handled, both by the executives who run the company and the governmental leaders who have allowed it to be run so poorly.
Being angry is one thing, but circumventing the Constitution of the United States is something quite different. Article 1 Section 9 of the Constitution says, “No Bill of Attainder or ex post facto Law shall be passed”, meaning Congress is prevented under our Constitution from singling out an individual or group without a trial and is prevented from imposing taxes after the fact. In this case, AIG employees had already received their bonuses as part of a legal contract.
The House vote was 328-93 in favor of the tax bill. What is clear to me is that a majority of our representatives have lost their moral compass. They no longer use the Constitution or ‘right versus wrong’ to guide their decisions, rather they use public opinion polls. There is no doubt in my mind that if the public had not raised such a fuss, Congress would have never challenged the issue. Two of the loudest noisemakers are Senator Chris Dodd and Congressman Barney Frank. Chris Dodd, the Senate Banking Committee Chairman was the key architect of the specific language related to AIG bonuses. After first denying knowledge of the provision allowing the bonuses, he reluctantly admitted that the Obama administration pressured him to insert language allowing the bonuses. Not surprising, he was the largest recipient of AIG 2008 campaign contributions amounting to $103,000. Barney Frank, Chairman of the House Finance Committee is a key figure in the tumbling house of cards at Fannie Mae where the subprime debacle began. He, among others, led the charge for Fannie Mae to make subprime loans and fought every effort to reform this government sponsored enterprise (GSE). He did this while accepting political contributions from Fannie Mae and Freddie Mac in excess of $40,000.
To accent the scary tone in Washington, Iowa Senator Charles Grassley called for AIG executives to commit hara-kiri, the Japanese ritual suicide of disembowelment. No doubt that if the angry American mob had called for a good ‘ole lynching, the House of Representatives would be voting on how long the rope should be. Voting to tax a particular group establishes a precedence that would allow our government to breach contract law at their will. Next time, you may find that you’re wearing the bull’s-eye.
In Alabama, only Congressmen Bachus and Bonner voted with the Constitution. Bachus’ reason for voting against the bill? “Mainly I felt it was unconstitutional. You shouldn’t use tax policy to punish people you don’t agree with.” The Senate has wisely decided to postpone their vote on the AIG bonuses. If you believe in upholding the Constitution, let your senator know with an email to www.senate.gov.