04/18/2009 05:12 am ET Updated May 25, 2011

Tax the Bonuses

Amid all the hand-wringing about whether or not the government has the power to stop AIG from paying bonuses to the very people who helped precipitate the current financial crisis, there is a way for the government to get the bonus money back: impose a surtax on the recipients to recover their ill-gotten gains. Think of it as a new kind of "sin" tax. Surely, in this time of severe economic emergency, the extraction of "performance bonuses" from a company being kept out of bankruptcy by massive infusions of taxpayer money because the stability of the world financial system depends on it, amounts to a form of institutionalized looting. The government bailout should not permit AIG executives to escape the sacrifices being made by other working men and women to save their jobs and businesses, especially as the employees of AIG, at least those of its financial unit, would seem to bear a greater degree of responsibility for this mess than, say, the auto workers being laid off or asked to modify their union contracts in return for government support. Of course, it would be preferable if the intended recipients were to forego their payments voluntarily out of some recently recovered sense of propriety or responsibility or patriotic duty, but we are told that these people respond only when properly incentivized. Perhaps the threat of a "recovery" tax will at last get their attention.