Pat On My Back (Or Am I Scared)

In my February 10, 2009 Blog titled “Austin Powers or Timothy Geithner” (which is a must read by the way), I was complaining about TARP and Mr. Geithner’s lack of details about the Stimulus programs. In the penultimate paragraph of that Blog, in reference to TARP and Mr. Geithner, I said “…yet it doesn’t seem that there are any controls on the program”.

AIG paid out in bonuses approximately an identical amount of money it received in funds from the Government in order to prevent a collapse of world financial markets.

Let’s see, over a month ago I thought there were no controls over TARP and now it’s learned that TARP funds paid million dollar plus bonuses to 73 AIG employees, 11 of whom are no longer employed at the company. That is my Pat On My Back – I was right with this predication.

Here’s my fear – the Government is now contemplating a method of taxing these executive bonuses (if not immediately returned by the recipients) anywhere from 95% to 100%. There are various proposals on the table that basically provide for a special excise tax on bonuses received from firms that get a federal bailout. What’s next, taxing bonuses if your firm has a net profit margin greater than the average of those in your industry, or taxing bonuses if you drive a car that costs more than $40,000, or if your children go to an Ivy League school? I can almost hear people saying this will never happen. Based on current economic conditions, never say never.

This is getting out of control. While my February 10 predication regarding lack of controls with TARP funds was correct, I hope my “tax for any reason we can think of prediction” turns out to be completely wrong.

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