U.S. House of Representatives to tax bonuses at bailed-out firms

The U.S. House of Representatives passed a bill on Thursday that would see some American International Group executives hit with a 90 per cent tax on bonuses they received.
Ronald Schupp, centre, joins hundreds of workers protesting outside the Bank of America before marching toward AIG offices on Thursday in Chicago. The group said they were protesting the Wall Street firms whose behaviour before and since the U.S. bailout has weakened the economy through corporate excess. ((M. Spencer Green/Associated Press))
The U.S. House of Representatives passed a bill on Thursday that would see some American International Group executives hit with a 90 per cent tax on bonuses they received.

In a 328-93 vote in favour, the House said the tax will be imposed on any executive who got a bonus and made more than $250,000 US in income.

Politicians moved to introduce the tax after it became public that AIG paid out $165 million in bonuses, even though the company received billions of dollars in public bailout money.

"We want our money back, and we want our money back now for the taxpayers," House Speaker Nancy Pelosi said.

President Barack Obama, speaking in Los Angeles, said the House's vote "rightly reflects the outrage" that so many people feel about AIG.

The new tax will apply to executives at any firm that got at least $5 billion in bailout funds from the U.S. government.

Republicans slam Democrats on bonus legislation

Republicans charged the bill was a diversion from questions about why more wasn't done earlier to prevent the bonuses from being paid. House Republican leader John Boehner said on Thursday that "this bill is nothing more than an attempt for everyone to cover their butt up here on Capitol Hill."

"The Democratic majority and the Democratic administration authorized AIG employees — 73 of them — to get over a million dollars. Today they're embarrassed," said Republican Congressman Steven LaTourette of Ohio.

LaTourette was referring to a provision included in last month's $787-billion stimulus bill that authorized the AIG bonuses.

Democratic Senator Chris Dodd of Connecticut, who initially said he didn't know how the provision made its way into the bill, admitted on Wednesday he authored the AIG bonus waiver.

He defended himself Thursday, saying he was told to include the provision by people in the Treasury Department.

"But I didn't write it at my own behest.... I was being sought out and asked to modify this," he said.

Dodd said the Obama administration insisted he modify a proposal that would have reined in bonuses at companies getting billions of dollars in financial bailouts. The administration wanted Dodd's measure to apply only to payments agreed to in the future — thus clearing the way for the AIG payouts.

It was that or have his executive pay limits dropped altogether from the stimulus measure, Dodd said.

Treasury Secretary Timothy Geithner said Thursday that his staff merely pointed out that without the change, the government risked being sued by executives in line to get big bonuses from bailout recipients.

The U.S. Senate is expected to consider its own tax bill for bailout-related bonuses. Obama said he looks forward to receiving a final bill. He said he wants to receive legislation that will send a strong signal to business executives "that such compensation will not be tolerated."

On Wednesday, AIG CEO Edward Liddy, said that some company executives have begun returning part or all of their extra payouts.

Liddy said he had asked AIG employees who had received more than $100,000 to return at least 50 per cent of those payouts.

Some have "already stepped forward and returned 100 per cent," he added.

With files from Associated Press