AIG Bonuses Going Bye Bye?

Over the past few days, the $165 million paid to AIG employees in bonuses dominated the news cycle. Many have demanded they return the money, and some suggested Congress or the president should intervene to get the money back.

Well today, the House is throwing down the gauntlet and considering a bill addressing the bonuses. H.R. 1586 would tax bonuses paid by all companies receiving more than $5 billion in TARP funds at a 90 percent rate. People making less than $250,000 annually, however, would be exempt from the elevated taxation.

The sponsor of the bill is House Ways and Means Committee Chairman Rep. Charlie Rangel (D-N.Y.). Rangel said on Tuesday that he opposed using the tax code as a "political weapon" because he has "some concern that I have that people will lose credibility in the income tax system."

The bill does not apply to firms that have repaid the TARP assistance, and it does not tax "commissions, welfare or fringe benefits, or expense requirements." 

It is being brought up under suspension of the rules.  This procedural move prevents amendments, but it requires a two-thirds majority to pass.

But is the bill even legal? Article I of the Constitution forbids "bills of attainder," which former Supreme Court Chief Justice William Rehnquist defined as a "legislative act that singled out one or more persons and imposed punishment on them, without the benefit of a judicial trial."

It is not clear the provision applies in this case. But Sen. Judd Gregg think so. And even if the bill is not consider a bill  of attainder, it likely will invite a host of lawsuits, say legal experts.

The vote comes within the next few hours — we will have coverage for you.

UPDATE: H.R. 1586 passes 328-93.

Is this bill the right approach, or should Congress avoid taking action? Tell us what you think.