Tax on bonuses gets shunted aside

Mar 10, 2010 — The Virginian-Pilot

Bill Bartel

Mar. 10, 2010 (McClatchy-Tribune Regional News delivered by Newstex) -- U.S. Sen. Jim Webb's proposal to require a hefty tax on billions of dollars in

bonuses paid to some executives of financial institutions bailed out by the federal government hit a roadblock in the Senate on Tuesday.

Senate leaders set aside the Virginia Democrat's amendment, which would require a one-time, 50 percent tax on bonuses exceeding $400,000 that were paid to employees of 13 companies that received more than $5 billion from the Troubled Asset Relief Program, or TARP.

The tax, levied only on bonuses for work done in 2009, would generate $3.5 billion to $10 billion that would help pay down the national debt, Webb's office said.

The measure, offered by Webb and Sen. Barbara Boxer, D-Calif., as an amendment to a jobs bill, was put aside because Republicans would not consent to set a vote and Democratic leaders wanted to get the jobs legislation passed as quickly as possible, according to Jim Manley, spokesman for Senate Majority Leader Harry Reid.

Manley said in an e-mail that Reid favors the Webb-Boxer bonus tax.

Some influential business groups and the mayor of New York City, however, do not.

R. Bruce Josten, vice president of the U.S. Chamber of Commerce, sent letters to senators urging them to oppose the bonus tax "because it would hamper efforts to resolve the ongoing financial crisis, restore economic growth, spur job creation and is likely unconstitutional."

Josten warned senators that their votes on Webb's proposal could be part of the chamber's annual "How they voted" scorecard.

In New York, economists have said the hundreds of billions in federal bailout funds, including bonuses paid to senior executives, helped buffer the city from the worst of the recession.

Mayor Michael Bloomberg opposes Webb's plan because he is protective of a financial industry that provides hundreds of thousands of jobs in the city, said mayoral spokesman Marc LaVorgna.

Webb acknowledged in a televised interview that the millions of dollars in campaign contributions that the financial industry makes to Congress "makes it very hard" for many legislators to vote for the bonus tax. "But we take a lot of hard votes," he said.

Webb said he will try to get the bonus tax amended on to some other bill in the coming weeks.

He has argued that the taxpayers, who supported the 13 companies with a total of $397 billion to solve their fiscal crisis, deserve to share in the reward now that the firms are rebounding.

Executives affected by the bonus tax would include those employed by AIG (NYSE:AIG) , Bank of America (NYSE:BAC) , Citigroup (NYSE:C) ,

Fannie Mae (NYSE:FNM) , Freddie Mac (NYSE:FRE) , General Motors, GMAC, Goldman Sachs (NYSE:GS) , J.P. Morgan (NYSE:JPM) , Morgan Stanley (NYSE:MS) , PNC Financial, U.S. Bancorp (NYSE:USB) and Wells Fargo.

Bill Bartel, (757) 446-2398, bill.bartel@pilotonline.com

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