GOP wary of plan to tax AIG bonuses
By: Manu Raju
March 19, 2009 04:25 AM EST
dyn.politico.com
A plan to recoup millions of dollars of American International Group bonuses by taxing them into oblivion has put top Republicans on opposite sides of a riddle: When is a tax hike not a tax hike?
House Minority Leader John A. Boehner (R-Ohio) said that he hasn’t made up his mind about the plan — first proposed Tuesday by senior members of the Senate Finance Committee and given a full-throated endorsement by Democratic House leaders Wednesday evening — but that he’s sure that raising taxes on AIG’s bonus recipients isn’t, you know, a tax hike.
“I don’t know [that] anybody would look at that as a tax increase,” Boehner told POLITICO Wednesday.
But Jeb Hensarling would.
The Texas Republican — who until recently was the chairman of the Republican Study Committee — said a tax hike is a tax hike, even if the taxes being hiked are on somebody you don’t like.
“You know, this is the wrong instrument to go around and say [about] people that do things that are reprehensible, ‘I’m just going to tax them,’” Hensarling said. “Who’s up tomorrow? You know, a lot of my colleagues vote on reprehensible legislation — when I’m in power, should I vote to increase their taxes 100 percent?”
Leaders of the Senate Finance Committee are putting together a bill that would impose a 35 percent excise tax on AIG on bonuses greater than $50,000, force the company to be responsible for paying taxes for foreign employees who received the bonuses, and tax by 20 percent any deferred compensation that exceeds $1 million. House leaders are moving forward with similar legislation, which could hit the floor this week.
Although the plan has the support of Sen. Chuck Grassley (R-Iowa), the ranking Republican on the Finance Committee, other Republicans were slow to embrace it Wednesday. They wouldn’t mind letting the bonus issue linger for a while, and they’re wary of either signing on to the plan — and with it, a tax increase — or resisting it, and thereby risking being seen as insufficiently tough on AIG and its employees.
“First thing we have to understand is what happened,” Boehner said. “Who knew about this? What did they try to do to stop it? And I’m still trying to get the answers to the questions.”
Asked if it would be tough to vote against an AIG tax increase, South Dakota Sen. John Thune, a member of the GOP leadership, said: “It might be, yeah.” Like other Republicans, he said he had concerns about the constitutionality of going after a private company’s bonuses but added: “They ought to give them back. Absent them doing that, there are a lot of people who I think will probably be very inclined [to support it] ... Americans at least will want see some retribution for this and see them have to pay something.
“I’m not sure where I come down on that,” Thune said.
Asked repeatedly about his position on an AIG tax increase, Rep. Tom Price (R-Ga.), the current chairman of the Republican Study Committee, wouldn’t say one way or the other.
“I think the Democrats are driving the economy into the ground, and I oppose that,” Price said. Asked if he meant that he opposed the bonus-tax plan, Price said, “I haven’t said that.”
He later added, “I’ll see what the bill looks like. What they want to do is find bogeymen so they don’t have to fix the problem.”
Senate Minority Leader Mitch McConnell (R-Ky.) also repeatedly dodged questions about taxing AIG bonuses, choosing instead to raise his own about why the Treasury Department gave AIG $30 billion on March 2 without spelling out conditions on compensation.
House Republicans say they have no plans for now to whip a vote against the bill. “Why would we fall on our swords for this one?” asked Rep. Kevin O. McCarthy (R-Calif.), the chief deputy whip.
But several conservative groups off Capitol Hill would like to see them do so. The National Taxpayers Union, which generally opposes tax increases, plans to record the vote in its score card of how lawmakers vote on issues it finds important. “This is precisely the kind of micromanagement from Washington we warned Congress about in approving bailouts in the first place,” said Pete Sepp, vice president for policy and communications for the National Taxpayers Union.
The American Conservative Union said it does not plan to mention this in its score card, but a spokesman said that could always change.
Thirty-four senators and 172 House members signed a pledge with the Americans for Tax Reform saying they would not vote to raise taxes. The group is still evaluating the legislation and has not determined yet whether a vote for the plan would violate the pledge.
But Grover Norquist, the conservative anti-tax activist who heads the group, suggested the plan was simply a fig leaf for “a bad decision on spending.”
For his part, Grassley said he “wished” Congress didn’t have to take such action, but it is what it is.
“I don’t want to dictate how business should operate, but these companies have accepted massive infusions of public dollars, and the outrage against the bonuses is justified,” he said.
Sen. Jim Inhofe (R-Okla.) said he’s not persuaded.
“I’m disappointed,” he said of Grassley’s position. “I just don’t want the government in a position where they’re going to be able to come in and selectively pass taxes that target one individual because of something the government thinks that person shouldn’t have done.”
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