The much-reviled US tax code contains within it thousands of special treatments and exclusions that enable small subclasses of people to enjoy deductions, credits or even exclusions from paying taxes.
There is ample precedent, therefore, for the Congress to define subclasses for special tax treatment.
Congress can find that payments from US taxpayers to financial institutions to prevent bankruptcy in the public interest were not designed to satisfy contractual obligations that would have been abrogated had the company died its natural death. From such a finding, it can, in keeping with precedent defining subclasses for special tax treatment, set a very high tax rate, say 85%, on all income of those who received at least a certain level of income from these institutions.
While they are at it, Congress could also clawback similar categories of income received last year, and even add certain subclasses of people who received huge bonuses in the 3 years leading up to the company's need for taxpayer bailout funds. Those banks that took bailout money at the behest of the Treasury, but would not have become bankrupt had they refused, ought to be excluded.
This is not, nor should it appear to be, a witch hunt. If it were, or appeared to be, the taxes could be viewed as punishment rather than recovery, and thus potentially subject to the prohibition against ex post facto laws in the Constitution. In Calder v Bull, [3 U.S. (3 Dall.) 386, 393 (1798)], the Supreme Court determined that that prohibition applied only to criminal laws.
Clawback from those who caused those institutions to go 'broke back' requiring taxpayer bailout and from those who never would have received any money had their institutions died natural deaths are both legitimate recovery.
And, it is very important. Public support for fixing the financial system is vanishing. The egregious bonuses are a constant reminder of how the wealthy are able to jigger the system to benefit themselves.
To show those days are over, the President and Congress should act through the tax code.
There's no reason for the filthy rich to hoard so much money, especially since it was probably ill-gotten to begin with. Let us stop the silly worship of the wealthy; we now know that their feet are made of clay. They are no better or more talented than the average person, they just have less scruples.
Then the ensuing income tax levied could be increased, using the AMT, alternative minimum tax, which will tax the hell out of the excess income tax - sort of a tax on top of the tax. It's been on the books for years, and is perfectly legal.
And make it retroactive while they're at it.
Then the IRS has to follow up with the affected people, to make sure they pay their taxes when due.
quote:
This is not, nor should it appear to be, a witch hunt. If it were, or appeared to be, the taxes could be viewed as punishment rather than recovery, and thus potentially subject to the prohibition against ex post facto laws in the Constitution. In Calder v Bull, [3 U.S. (3 Dall.) 386, 393 (1798)], the Supreme Court determined that that prohibition applied only to criminal laws.
/quote
Let's do this.
9:35am
Indianapolis Central Library
I love this idea. It seems to be the easiest way to get the money back into the Treasury.
And I would like to propose a CREDIT for people who are homeless. The Earned Income Credit does not help people who have been unemployed or underemployed so there needs to be a tax credit to get money into the hands of homeless people who want to rent a place. And buy stuff.
My only problem is that $100K figure. Make it $1.
I don't criticize your emotions here... just saying that you have to look for another outlet. This one is completely unsuitable and you will end up even more disappointed and outraged.
Just look at the drug laws pertaining to blacks and whites re: cocaine and crack.
I see no reason not to rewrite the tax laws for, say, hedge fund managers. They're already taxes differently. So....those conditions can be changed to not be so advantageous. Same goes for bonuses. They can be taxed at a much higher rate than a regular salary.
The law can be used for anything we want. So if AIG doesn't see fit to do the right thing, they will be forced to one way or another.
There is, of course, case law which provides that Congress can even adopt retroactive provisions without viiolating the Constitution.
Some caution needs to be exercised, however, and we need to watch actions of the politicians.
If all of them genuinely want to claw back the taxpayer-financed bonuses, they will propose and draft the legislative language in a way that does not violate Article I, Section 9, paragraph 3 of the Constitution regarding the prohibition against creating a Bill of Attainder.
In contrast, if there are those who want to pretend that they want to recover unjustified bonuses while actually wanting to work to provide protection for the recipients through the Constitional provision, they may purposely do just the opposite.
Of course, the same paragraph in Article I, Section 9 contains a prohibition against ex post facto laws but this prohibition is restricted to criminal laws and is inapplicable to strictly tax provisions even when they are intended to be applied retroactively.
Let me make a prediction: the politicians will milk this as long as they can and by the time it's milked the public will have moved on. Then they will drop it.
In short: sometimes one just has to suck it up, no matter how bad it feels.
The Supreme Court can follow its own precedents. It is not required to subscribe to any alternative theory that you think is or might be offered.
As noted by the Chief Counsel's office for the Treasury Department in a particular 2001 memo:
"The United States Supreme court has repeatedly upheld retroactive tax
legislation provided the legislation is supported by a legitimate legislative purpose
furthered by rational means."
http://www.irs.ustreas.gov/pub/irs-wd/0108040.pdf
That memo cites one particular Supreme Court opinion. If you review that opinion, it will lead you to others.
If you believe that the Supreme Court must subscribe, if at all, to a "theory that the law can be used by the government to break existing non-government contracts," I suggest that the theory originated with you and it doesn't have to be defended by anyone else. However, since you raised the issue, please let me mention that the theory that you raised is not a particularly unusual one and give you just one example of which virtually all adults are aware. Prior to Prohibition, some alcohol producers had enforceable contracts. Prohibition changed that. A person who researches the law will find other examples as well.
This is pretty sick stuff. I don't want a federal government anymore, States could most probably take better care of themselves by themselves. No more President for me, any party!
I happen to agree with him. In response, however, you have offered your opinion that his proposal would be futile while saying, in part, "... there are so many problems with their "taxing" the bonuses, constitutionally that is."
You are welcome to your opinion.
With respect to the futility issue, you also said, "Congress can scream all they want, ..." Does this mean something to you? It doesn't to me because I don't know of anyone in Congress who is screaming about this. If such an event has occurred, I haven't observed anyone in Congress screaming, or shriking, or even shouting.
If the reason for any of this is red hot revenge of the system on the system, so be it. Let's destroy Rome while we are at it (by which I mean the tax code, of course).
But if we are trying to actually punish the people who are most responsible, the tax code is a dull weapon. I can already see thousands of IRS workers with a $50k salary and a grudge work out who is supposed to pay back taxes and who isn't. And I can see the secretary being thrown under the bus without legal representation (which she can't afford), while the CEOs will get themselves a $6000/hour law teams (and have a hundred amicae curiae speak on their behalves) and sue their way all the way to the supreme court which will give them all their money back and then some.
It is recovery. If it were punishment, it would violate the Constitution's prohibition against ex post facto laws. As recovery--just as in providing asymmetric benefits under the tax code--this is perfectly legitimate and would pass constitutional muster without problem.