I’ve been “back in the saddle” here in Washington for 3 weeks now, and I can’t believe what I am seeing. I am angry. Angry because of the direction in which this Congress and this President are taking the nation; angry because the atmosphere here is so poisonous; angry because it seems so many leaders here are still campaigning when we have a crisis that demands responsible leadership.
But I am also sad. Sad because the policies being put in place and proposed will leave so many out of work for so long. Sad that opportunities may be limited for a decade.
And I am scared. Scared because things may still get worse before they get better.
Over the next several days, I will give you some very personal reflections on what is happening, but first, the AIG debate.
Oh, and to preempt the inevitable question, I was not invited to President Obama’s campaign rally in Costa Mesa this week, even though my district is only about a mile from where he spoke. I use the words “campaign rally” rather than “town hall” intentionally.
AIG: All the ire surrounding AIG right now is about the bonuses. But frankly I’m more worried about the $1.6 TRILLION of assets that AIG needs to liquidate from their financial products division. Mismanagement there could easily cost the taxpayers $100 billion or more. And I am worried about their formerly profitable property and casualty as well as life insurance divisions. Taxpayers have invested $80 billion in AIG. We will never get it all back. And we will almost certainly put in more. But any hope of getting any of it back requires the sale of those “good” divisions. But they are sinking fast. These are the questions I asked AIG CEO Ed Liddy this week. A video of my 5 minutes with him is below. Before you play it though, remember that this guy came into the company in September 2008 to clean up the mess. He was formerly CEO of Allstate Insurance and could do anything he wants. But he is doing this for $1 a year with no bonus and no stock options and no opportunity for upside. He is selflessly doing a public service. Still, many of my colleagues beat up on him…..probably because he has that now most despised title of…..CEO.
What is going on with this company is evidence of why business entities should never be nationalized, as AIG, CitiBank, Fannie Mae and Freddie Mac have been. Governments can’t run profit making entities. No government has ever done it well, including this one.
Click Here to view my questions
Income Confiscation: I firmly opposed and voted "no" on HR 1586. Let’s first understand exactly what the bill does. It imposes a 90% federal income tax on any bonus paid to any employee of any company that has received over $5 Billion in federal rescue funds. Such companies include, Bank of America, Wells Fargo Bank, Chase Bank, JP Morgan, CitiBank, Morgan Stanley, Merrill Lynch, Wachovia, Washington Mutual, Countrywide, Goldman Sachs, AIG, Fannie Mae, and Freddie Mac amongst others. The tax would only apply to people with total joint incomes over $250,000 or single individuals with income of over $125,000. When combined with California income taxes which now top out at 10.55%, this can be a tax just short of 101% or more of the income.
Under this law, a bank teller at Wells Fargo could receive a bonus of $1,000 for doing a great job. If that bank teller was married to a physician who made $175,000 and they had some additional investment income, that bank teller would pay a tax of $1,055 on the bonus of $1,000 that he/she received for doing a good job. This is horrible!
This is not raising revenues, this is punishment. It is a terrible precedent to use the tax laws for punishment. If we go down this road, the government can impose a 100% tax on anyone they don’t like or anyone they believe is paid too much. Employees of other companies, doing the same thing for the same bonus will not receive this tax. That probably makes it unconstitutional, and I hope it does.
I understand the public outrage over these bonuses and I share much of it. But this is not the way to fix it. Sue them to get the money back. But don’t do this.
You may or may not realize it, but embezzlement income is taxable today, but at normal rates. So if you steal money, you will not have a tax higher than normal. You may be forced to give the money back because you stole it, but it will not be taxed away from you. This bill makes a bonus from Bank of America a more egregious offense under the tax laws than bank robbery.
There is still another problem with this miserable bill. Over 400 banks have taken TARP money. But only banks that have taken over $5 billion are included in the bill. If you are a person working at Chase Bank and you receive a bonus as described above with payroll taxes in California, you will pay 101% or more in taxes. If your neighbor does the same job at the same pay and with the same bonus at one of the other 400 banks that also has TARP money, they will be taxed at the normal rate even though the government may have invested a greater percentage of the capital in your neighbor’s bank than it did with Chase. The government punished you and you specifically, without punishing someone else in an identical situation.
Is this really happening in America? Are we going to tax people more just because someone in government doesn’t like them? This is unconscionable in a free society and contrary to the founding principles of the United States of Amerca.
March 21st, 2009 at 12:00 am
Congressman: Good points.
However, my only question is why in your scenario would a bank teller want to work, even though that person may be married to a physician that should be a good provider to the spouse.
Wouldn’t it be wise to leave those part-time teller or other positions to those that REALLY need a job?
March 21st, 2009 at 12:00 am
Well, I don’t agree with Mr. Wilson that the teller shouldn’t take a job because their spouse already has a good job. That smacks of the liberal mentality of the limited pie, whereas we conservatives believe in an expanding pie. However, I thought the tax only applied to bonuses paid to executives, not tellers.
March 21st, 2009 at 12:00 am
Mr. Stout: I am a conservative and believe in expanding the pie.
Therefore, in order to expand the pie means give others a chance of a job and that pie.
I think you misunderstood what point I was trying to make.
March 22nd, 2009 at 12:00 am
But, Allen, expanding the pie means a growing economy where there are enough jobs for everyone. No one should have to step aside from doing what they want to do because their working will prevent someone else from working. At least, that is the ideal we should be aspiring to here in America.