It’s not all that often I agree with Mike Dunford politically, but in writing about the AIG bonuses he’s right. The bonuses ought to stay with the executives who were paid them. Neither congress nor the president ought to try to tax these bonuses back.
Now obviously no executive at a failing bank deserves a bonus, even with the bank’s money. Even more obviously it’s repugnant to fund bonuses to failed executives with our tax dollars. But what’s done is done, and there are three facts to be faced.
1. The executives’ contracts require the bonuses, and the bailout bill specifically and explicitly contained provisions preventing the abrogation of those contracts. To unilaterally tear up a legal contract after the fact undermines the very foundation of the concept of a legal agreement. Imagine if for instance the government tore up a factory’s contract with a union to remove bonuses for workers. Obviously executives are a lot less popular than Fred the pipe-fitter, but the unpopularity of a person ought not affect his right to enter into binding agreements.
2. Additional targeted taxation of a legally paid bonus is a penalty to previously legal conduct after the fact. This appears to be an ex post facto law, explicitly prohibited under the constitution.
3. The taxation is directed against specific individuals who have not been legally accused or convicted of wrongdoing. This appears to be a bill of attainder, explicitly prohibited under the constitution.
And those are aside from the completely true point brought up by Mike, that it’s a horrible idea for the government to be in the business of using the tax code as extrajudicial punishment. It’s also aside from any of the other reasons put forth elsewhere online. In practice the constitutional issues may or may not actually be interpreted as unconstitutional by the courts, but on their face they look pretty darn unconstitutional to me.
I know a lot of people are angry; I am too. I saw a nightly news broadcast yesterday that all but tried to incite a riot. But that justified anger should not be an excuse to trample the constitution. The thing that separates free democracies from banana republics is adherence to the rule of law. Let’s let the rule of law stand.