Two Wrongs Don’t Make A Right: US Government Moves To Tax AIG “Bonuses”

Posted on March 19, 2009


It seems the Democratic-led House is moving quickly to capitalize on wide spread outrage at AIG “bonuses”. They are passing a special law to tax the money right back. For Globe coverage, see here. If you want to know why “bonuses” is in quotes, check out Rostockrose’s comment, here.

My view, as expressed in a previous post, is that these “bonuses” are highly objectionable and probably a symptom of something rotten at the core of AIG and corporate America. Even so, either the contracts and the payouts are legal or they are not legal. If they are legal, the US government is wrong to claw it back through punitive taxes. If they are not legal, then due process should be followed. In other words, if it is illegal, sue the bastards and lay criminal charges. If not, suck it up and hope the AIG employees are shamed into doing the right thing.

I really can’t think of a worse outcome for this whole fiasco. One does not remedy a breach of trust and personal responsibility that is technically legal with another breach of trust and personal responsibility that is technically legal. Moreover, the thought of the US government engaging in punitive and personal tax warfare to make up for their own lack of due diligence is down right chilling. Remember, they could have legally re-worked contracts and bonus structures when they first bailed out AIG. To address this issue now, through after-the-fact-taxation is a dangerous precedent. Fair and just taxation is an important element of the good society; taxation as a vindictive tool of retribution is tyranny. 

What do you guys think???


For more of my political commentary, click here.