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Is it legal for the government to claw back AIG bonuses with taxes or otherwise?

Asked almost 3 years ago - Los Angeles, CA

I've heard several ways proposed to claw back the AIG bonuses. One way I've heard is that Congress wants to make a tax targeting AIG to get the bonuses back that way. But would that be a bill of attainder? How an you have a tax that targets one corporation? And then I heard the stimulus bill at one point had language that retroactively would have blocked "excessive" compensation, but it was eventually removed. In any event, how can the government retroactively take away people's earnings? Isn't that some kind of ex post facto law?

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Attorney answers (2)

L. Maxwell Taylor

Reputation Level 17

Answered almost 3 years ago. Appeals Lawyer in Middlebury, VT.

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I have wondered the same thing myself. Surely the Obama administration is cognizant of these issues. "Obviously we're not going to break the law, but there are a number of legal means that we have to push back." It remains to be seen how the judicial branch will rule if Congress enacts legislation and the bonus recipients fight back in the courts. Until legislation is enacted, cases are brought and the courts rule, your armchair analysis is as good as mine.

Interesting discussion appeared in the New York Times two days ago: See link below.

When Bonus Contracts Can Be Broken

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Carolyn Annette Elsey

Reputation Level 15

Answered over 2 years ago. Family Law Attorney in Sumner, WA.

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I think this is a great question. As repulsive as the AIG bonuses were, the prospect of Congress using its tax powers for such an obviously political purpose ought to scare the daylights out of anyone. Whether you like the current administration or not, the pendulum always swings back the other direction. Those who enjoy wielding the power (or support those wielding the power) will be supplanted by others. Do you want THEM wielding that same power down the road? Power never dissipates. It will be used by someone. They may end up doing exactly the same thing to an entity more sympathetic than AIG.

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