Friday, March 20, 2009

Bonus Tax not the Answer, Some Say


The Senate is taking up a controversial bill that would impose a hefty tax on bonuses paid out by companies propped up by taxpayer money.

But, as outrageous as the bonuses may seem, critics of the bill say the tax code should never be used as punishment.

Lawmakers cried foul after it was revealed earlier this week that ailing insurance giant American International Group doled out $165 million in retention bonuses, after claiming more than $170 billion in bailout funds.

The House of Representatives on Thursday passed a measure that would tax individuals on any bonuses received in 2009 from companies getting $5 billion or more in money from the Troubled Asset Relief Program, or TARP. Bonuses for people with incomes over $250,000 would be taxed at a 90 percent rate.

Most Democrats supported the bill, while Republicans were sharply divided.

House Speaker Nancy Pelosi, D-California, said the bill was necessitated by the poor judgment shown by firms receiving bailout money.

"We must stabilize the financial system in order to strengthen our economy and create jobs," she said. "We must also protect the American taxpayer from executives who would use their companies' second chances as opportunities for private gain."

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