The Tax on AIG Bonuses: the Law of Unintended Consequences

A bill, rushed through Congress, because urgency was required before intellectualism or rationality.

Sound familiar?

After passing a stimulus bill, which no one had read at the time they voted for or signed the bill, which conveniently contained a provision allowing companies receiving bailouts (read: AIG) to hand out bonuses, you would think our leaders would have learned their lesson.

Guess not.

Yesterday, the House quickly passed a provision to tax 90% any bonuses received by companies receiving bailout money from the government. There was little or no debate, because it had to be done, now not later. Why? God only knows. But they got it done, hell or high water. And so it goes to the Senate, where no one will have courage to stand up to it. Mr. Obama will quickly sign it and hail it as a great piece of legislation.

What a farce. This is a debacle compounding a government created mess.

First, as I stated several days ago, it is highly questionable whether a retroactive tax is constitutional. Addressing Congress directly, the Constitution says, "No Bill of Attainder or ex post facto Law shall be passed." (Article 1, Sec 9.). But lets not let a little 220 year old document get in the way of political expediency. There are plenty of legal experts who say that this bill will pass constitutional muster, but honestly, no one really knows because the ban on bills of attainder has been ruled on so rarely. In any case, this is sure to be fought out in the courts, which means our government will waste even more money paying lawyers to fight a case that was passed to solve a mistake that our government created in the first place.

Um, yeah, right. Makes your head spin.

Of course, none of our politicians read stupid historical books, say, like the Federalists Papers. In the simplest terms, that article prohibits legislation punishing or penalizing a specific person or group without trial. In the Federalist Papers #44, James Madison wrote in 1788, "Bills of attainder, ex-post-facto laws, and laws impairing the obligation of contracts, are contrary to the first principles of the social compact, and to every principle of sound legislation." Seems pretty clear to me, but Nancy Pelosi is of another mind, obviously.

Now you know that on top of this immediate stupidity, there will be a long term effect. I can predict it now. This stupid tax is going to hit some poor innocent person who had nothing to do with AIG or any other terrible business. And then Congress will have to come back to fix the legislation that was passed to fix the mistake caused by the initial legislation.

I think I am getting dizzy.

Now, the final straw. You know that many of the employees at AIG that were supposed to get these bonuses are the devil incarnate, evil-evil-evil people that should be crucified. Well, at least that is what our leaders and media have been saying. But ultimately, you know what is going to happen? These employees are going to leave. Why would anyone stay at AIG now? They are a dead man walking; everyone, including their CEO, admits that AIG will not exist as a true entity a few years from now. So these people, who Congress has now demonized, are guaranteed to leave. Bankers from Asia, Europe, and North America have all sounded alarm bells over this new tax, and everyone knows the result: talent will flee the U.S. if at all possible. And some, but not all, of these people are essential for the inner workings of AIG. So we are going to have a already devastated company that will be further weakened, and that will make it even more difficult for AIG to fix their immense problems. That, in turn, will make it harder for them to be able to pay back the $180 Billion that they owe each citizen of these United States...all because Congress wanted to get back one tenth of one percent of that money back because they were paid as bonuses.

I am lightheaded...I think it is time I lie down now...