The Unconstitutional AIG Bonus Tax

Today the House voted to tax the AIG bonuses at a 90% level, and Obama applauded it:

news.yahoo.com...

WASHINGTON – Denouncing a "squandering of the people's money," lawmakers voted decisively Thursday to impose a 90 percent tax on millions of dollars in employee bonuses paid by troubled insurance giant AIG and other bailed-out companies. The House vote was 328-93. Similar legislation has been introduced in the Senate and President Barack Obama quickly signaled general support for the concept.

"I look forward to receiving a final product that will serve as a strong signal to the executives who run these firms that such compensation will not be tolerated," the president said in a statement.

Regardless of how you feel about the bonuses, this bill is nothing but political grandstanding and an example of false outrage from an incompetent, complicit Congress.

More importantly, it is unconstitutional on two fronts:

It passes an ex post facto (after the fact) law. It makes something illegal today that you committed yesterday.

It singles out a segment for punishment.

Both are a violation of Article 1, section 9 of the Constitution which reads in part

"No bill of attainder or ex post facto Law shall be passed."

rightwingnews.com...

This was one of the main reasons we broke off from Britain 300 years ago. The crown was famous for pulling these stunts to punish the colonies.

So, this may sound good, and make you feel good, but it's the wrong way to do things.

And Obama should realize that it is unconstitutional. Of course, he is counting on the ignorance of the average voter, and if this bill is shot down, he will blame "the greedy Republicans". And the masses will fall for it.

[edit on 19-3-2009 by jsobecky]

reply to post by jsobecky


Yes, I completely agree, but for us to think our politicians are Constitutional Scholars would be a joke. I would hazard a guess few have ever read this line.

But while I disagree with their actions, I am not fooled. The executives can claim the mount paid in taxes as over taxation on their 2010 taxes. They will essentially be given the money back after normal taxation. I would also bet that the people who received these funds won't be seriously taxed, but the "next round" may. Unless the IRS is planning on sending these guy's a bill for the money owed, and I would also bet these guys have good lawyers, which would have an open and shut case.

I don't like the bonuses nor do I like these bailouts, they are nothing short of looting our country before it collapses and leaving us reg folks sol...

Congress should have never bailed out these failures But seeing as they did they should have also read the fine print before doing so...

Article 1 Section 9 - Limits on Congress
No Bill of Attainder or ex post facto Law shall be passed.

Before, I used to think that despite all of the sloppiness, we were still somewhat moored to our constitutional principles.

Today, we have been decidedly cast adrift.

The United States of yesterday is taking her last breaths.

Welcome to a brave new world, people.

[edit on 19-3-2009 by loam]

The law is destined to be shot down by the Supreme Court. It's throwing good money after bad. Who realistically thought it would get this bad? The people are PO'ed. We were PO'ed when Bush gave the first bailouts and well - we're screwed. I guess one way to get rid of waste in government is to get rid of all the money so we can't spend anymore.

I know it's natural and in fashion to blame the current problems on the current office holders but a boondoggle this big has it's beginnings many years ago. I hope we can put aside politics and make something that really works this time around.

Invest in Pepto-Bismal.

reply to post by stikkinikki

Originally posted by stikkinikki
The law is destined to be shot down by the Supreme Court.

Don't be so sure. Remember Kelo v. City of New London?

That was the first mortal wound to the Constitution.

Today finishes the job.

[edit on 19-3-2009 by loam]

reply to post by stikkinikki

Invest in Pepto-Bismal.

and Vaseline also.

You are correct that this problem goes back and back. However, Obama is bringing a lot of this criticism upon himself for setting the bar so high on how ethical, transparent, and lovable he was going to make our government.

And he probably could have done that if he didn't have to deal with the 535 ROCKS up on Capitol Hill. Ultimately, Congress will decide how successful or unsuccessful Obama will be IMO.

This is so unnerving.

I suspect that this is a plan that went awry.
That is was originally intended to create a type of class warfare.
Problem is they were busted, and now Obama has to go on Leno to grin for us.

Originally posted by Rockpuck
Unless the IRS is planning on sending these guy's a bill for the money owed, and I would also bet these guys have good lawyers, which would have an open and shut case.

If their lawyers are good enough to win this challenge and the Government appeals this case in the Supreme Court, I can envsion several things that could possibly happen.

It could be the impetus to get the last few states you guys need to open a Constitutional Convention in an attempt to amend the Constitution.

The other is what will be the reaction of the general population of the US when the execs of one of the companies that has pushed the world to where it is now fighting and winning to keep taxpayers money as a bonus for the stellar job they have done.

Would it be the straw that broke the camels back for some?

ETA: (I don't know if AIG would try to fight this or not, just speculating )



[edit on 19-3-2009 by GAOTU789]

Originally posted by GAOTU789
The other is what will be the reaction of the general population of the US when the execs of one of the companies that has pushed the world to where it is now fighting and winning to keep taxpayers money as a bonus for the stellar job they have done.

Would it be the straw that broke the camels back for some?

(Emphasis Supplied)

If so, that wouldn't be because it happened to be true.





[edit on 20-3-2009 by loam]

reply to post by loam


I completely agree with loam. (does that scare ya' loam? )

The AIG Bonus Tax is unconstitutional. If the gov't tries to take their money, then there will be a ton of lawsuits.

Man .. this is just like Atlas Shrugged.

While I can't stand that the bozos who ran the companies into the ground are getting all those $$$ for doing it ... it's in their contract and you cant' go back in time and undo it.

TV news is reporting that Michelle Obama said she wants to tax them %1000 .. yes, one thousand percent. IF SHE SAID THAT, then I think we should retro-tax Obama and get back %1000 more of the over $100,000 that AIG gave him as a campaign contribution. That's a million $$$.

Originally posted by loam
The United States of yesterday is taking her last breaths.

Welcome to a brave new world, people.

[edit on 19-3-2009 by loam]

It seems as thought the only question left is whether we will be a new Country based off of what the politicians think it should be or what the people think.
If it does turn out that the people take the country back I think we all know what that will mean.

I think we are finally seeing the results of decades of self interest in Washington being fully implemented. The powers that be could care less about the law as it was written, only the law as they see it.

first of all what is going in this nation is nothing short of treason against the tax payer.

Pay offs to everybody for incompetence, but nothing back to the tax payer again.

Rest assure people that it doesn't mater anymore our nation has bee sold to the Federal Reserve that now is printing and sending billions of dollars oversea behind our backs.

While the news concentrate on the AIG bailouts the thieves are running with billions through the back door.

At the end the new so call man of change and all for the American people is not going to sign the bill.

Those are the rumors, the play their game and now we are laughed at, he may no even sign the bill

This is the real story that should be braking in the news right now.

U.S. Pumping Billions into Foreign Central Banks

How the federal Reserve is already doing the job of the new entity that is supposedly planing to form.

We have been deceived and people still think that the AIG is the biggest scandal going on right now, even I felt for it.

According to the Huffington Post, for over a year now the U.S. Federal Reserve has been pumping hundreds of billions of dollars into foreign central banks, which are then using the funds to bailout financial institutions inside their own borders.

“The program has so far gone unreported in the mainstream media and is a major expansion of Federal Reserve involvement in the global economy,’ Ryan Grim of the Huffington Post writes. “It represents a stark break from the prior role of the Fed, moving it into territory more traditionally occupied by the International Monetary Fund (IMF).”

Incredible!!!!!!

www.huffingtonpost.com...

Wake up America our time is running out.

Originally posted by jsobecky
More importantly, it is unconstitutional on two fronts:

It passes an ex post facto (after the fact) law. It makes something illegal today that you committed yesterday.

If the bonuses have already been previously agreed and written into an execs contract, then to prevent any payment would be an open and shut case of breach of contract and a civil case could be made to force full payment

Alternatively, as long as the bonus payment has not been yet made, then it amounts to an enforced change in the terms of contract which has yet to be fulfilled, which I guess is why only 90% will be clawed back rather than the full amount, to allow a 10% compensatory amount for the change in contractual terms.

It could only be an 'ex post facto' law if the terms has already been fulfilled and bonus payment made

The thing that is really scary and nefarious about this law being passed to "punish the AIG bonus recipients"- is that it establishes precedent. Any financial gain that is deemed "wrong" by the government can be revoked ex-post-facto. Which means that, hypothetically, hyper-inflation kicks in. The value of the dollar drops- and your salary is adjusted to compensate for inflation. Suddenly, that $150,000 you owe on your mortgage is equivalent to a month's salary, so you go ahead and pay off your mortgage in one fell swoop. Ditto for your car debt, your credit cards etc. What this precedent does is allow Congress to pass another law that says that all debt incurred before "date X" is subject to "fair adjustment". Which simultaneously wipes out your life savings (as the funds in your accounts will not be adjusted), while solidifying your debt.

This law should be fought tooth and nail. It is not only unconstitutional, it sets a very dangerous precedent. The banks fear inflation, because it can devalue their debt assets. Being able to go back and alter contracts retroactively could potentially allow them to lobby congress to draft legislation to adjust existing debt to reflect the current value of currency. If the currency changes, then it becomes even easier for them. It's a familiar story- the banks are protected, while everyone else gets hammered.

[edit on 20-3-2009 by moonwilson]

WTG Becky! S&F for you my friend!

Now, whereas I also hate the bonuses, Congress has clearly over-stepped on this one. This is simply smoke and mirrors. They need a boogey man and the AIG execs make a good one. Without the AIG execs people are bound to turn their attention to the REAL cause of this whole problem - the politicians themselves. These crooked pieces of crap know that. Take for example the blustering, bloviating sack of crap Barney Frank, or Chris Dodd or countless others directly responsible for creating this whole mess - their fake indignation disgusts me! I am sincerely hopefull that the next election cycle sees these clowns thrown to the streets!!!

reply to post by moonwilson


I can see I completely missed the point in my reply to the OP with the example you gave of setting precedent...thankyou for that, I leant summat new today

Well let me talk about the sanctity of contracts and our own corrupted government

The ones that are now pushing the unconstitutional side of taxing the bonuses are the same fat rats that under the Clinton administration pushed deregulation and then let go out of control.

Larry Summers is the one now pushing the constitutional side of the bonuses guess what people he is a crock and a butt kissing corporate puppet.

Now Obama doesn't have a darn regard about the sacred contracts that Labor unions agree to give back for the auto industry, were is the constitutional protection for them

The the same Obama now the constitutional protectorhave not problem stripping veterans for treatment of service where is the constitutional angle on that one? to protect this veterans from Obama downsizing Medicare and social security at their expenses

The entire bonus give away in AIG is nothing short than treason against the tax payer, we should be suing them for what they created they inundated the markets with with their bad deals and toxic payer and that is the mess they created that have the economy in the position it is right now

This people deserve nothing better than prosecution and jail time.

AIG, gave 13 billions of tax payer bail out to Goldman Sachs, while they got themselves 25 billions and while holding 100 billion in cash, were is the money now?

AIG were nothing short of criminal plain and simple, all backed by the Obama administration once it took over.

The hole bail outs needs investigation, auditing and scrutiny because is nothing that a big scam and many in congress that hold accounts oversea with those that the dictatorial powers of the fed is sending billions too probably have accounts with them.

The only dangerous precedent is the one that the nations is getting out of the thieves, rewarding and squandering of Americans tax payer.

Wake up America we have been deceiving and hold hostage to pay for corporate and wealthy America.

Unconstitutional my big Latino arse.

[edit on 20-3-2009 by marg6043]

[edit on 20-3-2009 by marg6043]

reply to post by kozmo


My Friend this bigger than the Madoff case and the entire government body is it, all of them cashing out from the AIG deals and the fed stealing the tax payer money and take it throught the back doors.

reply to post by citizen smith



The bonuses have already been paid. Here is a partial timeline; for the full timeline, visit the link.

www.propublica.org...

March 2008 -- AIG agreed to the retention bonuses [1]. The company's bets on mortgage-backed securities had already started to sour, forcing AIG to take a $5 billion hit.

Sept. 16, 2008 -- The government "rescued" the company with Bailout I -- an $85 billion loan.

Sept. 22, 2008 -- The company notified the Securities and Exchange Commission -- a week after the first bailout -- that the retention bonuses program had come into effect. Approximately 130 executives would get the first installment in December 2008, and the remainder in December 2009.

Oct. 9, 2008 -- AIG executives go on a "junket" at a California resort [2].

Dec. 1, 2008 -- Congressman Elijah Cummings wrote [5] to AIG CEO Edward Liddy, asking for full information about the retention bonuses, calling the program a "slight of hand" to get around the company's promise not to pay performance bonuses.

March 11-12, 2009 -- An Obama administration official told Reuters [7] that Treasury Secretary Tim Geithner only found out about the bonuses last Tuesday, called AIG to protest them on Wednesday and told the administration on Thursday.

And Chris Dodd made sure that the AIG bonuses were exempted from the legislation. He inserted the famous "Dodd Amendment":

Senate Banking Committee chairman Chris Dodd suggested one of the more severe solutions: that the government tax 100% of the bonuses, thereby recouping the losses. It may have been overcompensation, so to speak, on Dodd's part. The National Republican Senatorial Committee was quick to point out that Dodd had amended the stimulus plan to make a specific "exception for contractually obligated bonuses agreed on before Feb. 11, 2009." That exception gives cover to the AIG bonuses

www.time.com...

Clearly ex post facto.