Attempts to recover AIG bonuses via taxation are unconstitutional

Fox News reports on one popular idea bouncing around Congress as the torch-and-pitchfork mob tries to figure out a way to punish AIG for honoring their executive compensation contracts (emphasis added):

Senate and House lawmakers on Monday night returned to the idea of imposing heavy taxes to recover the bonus money.

"You can write a tax provision targeted specifically at 98 percent of the taxable proceeds," Dodd said, adding that it wouldn't violate the terms of the AIG contracts.

Rep. Carolyn Maloney D-N.Y, the chair of the Joint Economic Committee, also called for a 100 percent tax on bonuses not related to commissions. And Rep. Gary Peters, D-Mich., introduced a bill to recover practically all of the money through hefty taxes.

"If (AIG CEO Edward) Liddy does nothing, we will act and will take this money back and return it to its rightful owners, the American taxpayers. We will take this money back by taxing virtually all of it," Sen. Chuck Schumer, D-N.Y., said Tuesday. "So let the recipients of these large and unseemly bonuses, be warned. If you don't return it on your own, we will do it for you."

But while Dodd on Tuesday said lawmakers would continue to pursue this avenue, he added: "I don't know whether or not as a practical matter it will produce the kind of results we're looking for. We're all searching for a way to get this money back and one way or another we're going to figure out how to do it."

Nevertheless, Senate Majority Leader Harry Reid vowed to recover a sizeable chunk of the money.

"Remember, we, as a Congress, are not defenseless. We can also do things," the Nevada Democrat said Tuesday, announcing he has tasked Senate Finance Committee Chairman Max Baucus, D-Mont., with crafting a proposal to recover the bonuses.

Reid said Baucus "is going to make a proposal that I think will certainly send a message to you people at AIG and all others who try to benefit from the hardships the American people face ... AIG recipients of these bonuses will not be able to keep all their money, and that's an understatement."

Emotions are running at a fever pitch, and perhaps that's why our distinguished legislators have overlooked the simple fact that their taxation idea is unconstitutional.

One clause of Article I, Section 9 of the U.S. Constitution states simply: "No Bill of Attainder or ex post facto Law shall be passed." That section applies to the U.S. Congress. Section 10 extends the same prohibition to the states.

An ex post facto law retroactively criminalizes an activity that was legal at the time the activity occurred. The payment of the AIG bonuses certainly was legal, seeing that the payments were specifically authorized by those now pretending to be in a lather over them.

By attempting to seize the bonuses, Congress is in effect criminalizing the payments after the fact.


Not that Congress has been too keen on following the Constitution, but will any influential politician have the guts to stand up and point this out? Or will they, seeking to save their political skins, cower in the shadows?


UPDATE: On the Free Republic post of this article, someone noted that this idea also qualifies as an unconstitutional Bill of Attainder, since the proposed law in effect declares a specific group of people guilty of a crime, and punishes them without a trial.