Senate Democratic leader Harry Reid has had second thoughts about bringing the punitive bonus tax bill to a vote this week. Instead, the Senate will take up a national service bill, then have a contentious vote on the budget blueprint, and then there’s Congress’ spring break and, before you know it, we’re deep into April.
Delay is good. Killing the measure would be even better.
Just five days after the $165 million in bonuses at AIG became a public issue — although they had been public knowledge for months for anybody who cared to look — the House voted 328 to 93 to tax those bonuses at a confiscatory 90 percent.
True, you have to wonder how the executives of a firm that lost $62 billion last year and is on the hook to the taxpayers for nearly $180 billion in bailout money justified granting themselves bonuses. But the bonuses were legal, which is one reason the Obama administration decided against suing to recover them.
And using the tax code to single out and punish a relatively small group of people who have done nothing illegal is a bad precedent, bad law and horrible tax policy. The House justified its action as expressing its own — and the public’s — legitimate outrage. Point made.
But the furor, amplified by generous amounts of political grandstanding, was a major distraction for Congress, the White House, the Treasury and the Fed from the far larger issue of righting the faltering U.S. economy.
Both the House-passed bill and the Senate bill would also apply to any major financial institution that participates in the Troubled Assets Relief Program, and administration officials charged with cleaning up this mess say firms are reluctant to cooperate with the government for fear that Congress will use acceptance of any amount of federal money as a license to meddle in their affairs.
In any event, the public obloquy has shamed AIG employees into returning $50 million in bonus money and caused the company to take its name off its headquarters.
Senate Republicans are also having second thoughts about the punitive tax. GOP leader Mitch McConnell said, "My view is that this bill ought to slow down and we ought to think about the ramifications of what we’re doing."
Words that ought to be chiseled above the House and Senate doorways.