In reaction to the bill that imposes a tax on bailed-out companies’ bonus recipients, a Republican congressman has said the move may be ‘legally questionable.’
On Thursday the House overwhelmingly approved the legislation that will impose 90 percent surtax on any bonus paid after Dec. 31, 2008, by a company that received $5 billion or more in taxpayer money from the Troubled Asset Relief Program.
Any current or former employee whose family income exceeds $250,000 will be subject to the tax.
"The Democratic bill is constitutionally questionable," said Representative Mike Pence (Indiana), quoted by newsmax.com, adding that the Obama administration is trying to deflect attention from the fact that it had allowed the bonuses to be paid in the first place.
Earlier this week New York Attorney General Andrew Cuomo revealed that AIG, which received $170 billion in bailout funds, paid $165 million in bonuses and compensation, including to traders at its financial products division whose activities contributed to the near-collapse of the financial system.
This prompted the White House and many members of Congress to call for an excise tax on the bonuses, a reaction that culminated in Thursday’s vote.
In the meantime, however, it became clear that clauses included in the bailout deals allowed for pre-existing bonus contracts to be honored.
As a result, Republicans have been calling for Treasury Secretary Timothy Geithner to step down.