House Passes Greed Tax

House Passes Greed Tax

The U.S. House of Representatives voted 328-93 today to approve a bill that taxes bonuses such as ones awarded at American International Group Inc. that have drawn universal ire.

Ever since news broke a few days ago that insurance giant AIG, which received more than $180 billion in TARP funds, paid $165 million in bonuses to key employees, lawmakers on Capitol Hill have been fuming. They likened the bonuses to a mugging and an attack on the American taxpayer.

HR 1586 will apply a separate income tax rate of 90% to bonuses received by individuals from companies that have accepted infusions of capital of $5 billion or more under the TARP. The special tax rate would apply only to individuals with an overall income in excess of $250,000 and to bonus payments received after Dec. 31, 2008. The tax would cease to apply only after the company has repaid the federal government.

When asked how lawmakers settled on the 90% tax rate, New York Rep. Charles Rangel smiled and said they’re assuming that local and state taxes will eat up the remaining 10%.

“It just seems to be inconsistent that the people who allowed greed to substitute for responsibility should be rewarded by this and that we just stand by and do nothing. We worked long and hard to figure what was the best thing to do at this time,” said Rangel. “This is not going to happen again. The light is flashing, we’re letting them know America won’t take it and the House of Representatives has heard their voices.”