Rep. Steve Kagen joins House effort to tax AIG bonuses
March 18, 2009
By Larry Bivins
WASHINGTON — American International Group executives who received bonuses would have to return the money in the form of taxes under a House proposal endorsed Tuesday by Rep. Steve Kagen.
Kagen, D-Appleton, signed on as a co-sponsor of legislation that would require the Internal Revenue Service to apply a 100 percent tax rate on bonuses paid to employees who work for companies that have received federal bailout money.
The proposal comes in response to growing public outrage over reports that AIG, which has received $180 billion in bailout funds, intended to pay $165 million to its executives.
New York Atty. Gen. Andrew Cuomo reported Tuesday that AIG paid 73 executives $1 million or more each, including 11 who no longer work for the giant insurance company.
"We have to do three things," Kagen said during a press conference. "We have to clean up the economic mess left over by the previous administration; we have to catch and punish the crooks who have taken public money; and we have to rewrite the laws so that this can never happen again."
Kagen joined lead sponsors and supporters of two bills targeting AIG. One, drafted by Rep. Steve Israel, D-N.Y., would tax at 100 percent bonuses over $100,000. Kagen has co-sponsored that bill.
The other measure, authored by Rep. Carolyn Maloney, D-N.Y., would levy the 100 percent tax on all bonuses.
The Internal Revenue Service currently withholds 25 percent from bonuses less than $1 million and 35 percent for bonuses more than $1 million.
Maloney said the AIG situation is a "case study of mismanagement, abuse, reckless behavior and continuing insensitivity to what the American people are going through. They should voluntarily give this money back and apologize to the American people."
Since reports of AIG bonus payments resurfaced over the weekend, lawmakers and civic activists have lined up to blast the company’s plan.
On Monday, President Barack Obama said he had instructed Treasury Secretary Timothy Geithner to explore legal means to block the payments. Sen. Russ Feingold, D-Wis., urged the same thing in a letter to Geithner on Sunday.
Israel said trying to recover the bonus money through legal remedies would take a long time, while Congress could quickly pass the tax legislation. There was no immediate reaction from Republican leaders, who generally oppose tax increases.
"The only way you can get the money back is to tax it back," Israel said.