Lawmakers Push to Add Bonus Tax to $150 Billion Bill Before Senate

From the WallStreetJournal.com:

Two Democratic senators were pushing for a vote Thursday on a measure that would levy a one-time tax on bonuses paid to executives at firms that received significant infusions of taxpayer cash during the economic crisis.

If Sens. Barbara Boxer (D., Calif.) and Jim Webb (D., Va.) are successful, it would bring the contentious issue of executive compensation back to the fore.

"It's a one-time amendment based on a unique situation in this country when the American taxpayers had to bail out our major companies in order to stabilize our economy," Mr. Webb said on the floor of the Senate Thursday.

The tax would be a one-off 50% levy on bonuses above $400,000 paid to executives at institutions that received $5 billion or more of taxpayer support.

It would apply to 11 institutions, all financial firms except for car maker General Motors Co., which has one of the largest outstanding debts to the Treasury. Housing guarantee agencies Fannie Mae and Freddie Mac would also be hit by the measure.

Only bonuses paid in 2010 related to performance in 2009 would be impacted.

Bonus Tax not the Answer, Some Say

From CNN.com:

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."