President Obama has expressed anger at the $165 million in bonuses paid to American International Group executives, after the insurance giant took $170 billion in taxpayer bailout money—but he has also indicated that he will not govern out of that anger. Lawmakers in the House of Representatives, however, passed a bill on Thursday imposing a stiff 90 percent tax on bonuses paid by AIG and other companies that received bailout dollars.
In a 60 Minutes interview on Sunday, Obama appeared wary about the bonus tax. “As a general proposition, I think you certainly don’t want to use the tax code to punish people,” he said. “I think that you’ve got a pretty egregious situation here that people are understandably upset about. So let’s see if there are ways of doing this that are both legal, that are constitutional, that uphold our basic principles of fairness, but don’t hamper us from getting the banking system back on track.”
ESSENCE.com caught up with New York Representative Charles Rangel, chairman of the tax-writing House Ways and Means Committee behind the bill. The Senate is scheduled to present its own version of the measure this week. While the President may be cautious about taking this route, Rangel explains why he thinks the punishing tax is exactly the way to go.
ESSENCE.COM: On Tuesday you seemed apprehensive about taxing AIG bonuses, saying, “It’s difficult for me to think of the code as a political weapon. But by Thursday you fully supported the idea. Why did you change your mind?
CHARLES RANGEL: I didn’t say we shouldn’t do it. I said then as I do now, that I do have a problem with the tax code being used as a punitive measure. But since we had to do something, I immediately went into meetings with members of the Ways and Means Committee, and we reached a conclusion that we did not have too many weapons to stop this almost criminal behavior of executives. When we see the irreparable harm these people have done to the economy, to their companies, to the guys in the street who have lost their jobs, homes, health care and dignity; when we see the condition of countries that have been dependent on our stability, we knew that our tax code was the only weapon we had to get the taxpayers’ money back. So it wasn’t a change of position. Using the tax code at a top rate of 90 percent, which just deals with bonuses, is a very awkward thing to do. But this is an extraordinary attack on the American taxpayers and requires an extraordinary response.
ESSENCE.COM: An argument that’s been made against the bill is that it attempts to clean up the AIG bonus mess after the fact, when Congress should have done more to block them from being paid in the first place. Your response?
RANGEL: Let me tell you that most of the “opponents” voted for the bill, number one. Number two, the argument was never against the merits of the tax, but that something happened in a previous bill where protection was given to these people. The truth of the matter is, we inherited this package from Bush. This has been done and was about to continue to be done with additional bonuses given. So I don’t see where the opponents, and you can tell by the vote, had any valid arguments to make against the action we took of the House floor.
ESSENCE.COM: Well, one argument is that Congress dropped the ball on the stimulus package, with regard to that section that protected executive bonuses. And there wasn’t close monitoring of how the bailout money was used. Was there a lack of oversight?
RANGEL: There’s no question about it. And we’re not letting them rob the bank and skip out of town. You might say, “Why didn’t you stop them from robbing the bank?” We didn’t, whether it was Bush or whether it was Obama, but we’re taking back the money and we’re making certain that they don’t do it again. You might ask, “Why didn’t you stop them from doing this in the first place?” I would say I don’t know.
ESSENCE.COM: There are several theories on that. Fingers have been pointed at Senator Christopher Dodd for adding language to the stimulus bill protecting the bonuses, and Treasury Secretary Tim Geithner for not alerting the White House about the bonuses sooner. Who do you think is responsible?
RANGEL: The companies are responsible. Any ideas that you’re raising, that were raised on the floor, that perhaps somebody could have stopped this money from going to these scoundrels, is not the issue that’s before my tax-writing committee. Our job was to get the money back.