Constitutional Law

Of Outrage and Taxes

With outrage peaking over bonuses for American International Group employees, the House has passed legislation that would tax such bonuses at a rate of 90 percent. Whether such a tax bill is constitutional is examined by David Savage in The Los Angeles Times.

'[N]o bill of attainder or ex post facto law shall be passed,' according the constitution. Bills of attainder punish specific people, and ex post facto laws punish past wrongdoing. The 90 percent tax rate passed by the House would apply to people earning more than $250,000 in adjusted gross income in 2009 and who get bonuses from companies receiving $5 billion in bailout money.

However, Savage writes that opponents of the law 'are not likely to win a court challenge if the legislation becomes law, because courts have given legislatures broad leeway to raise and lower taxes without running afoul of the Constitution, legal experts said.'

'The courts are very reluctant to strike down tax legislation,' said Edward McCaffrey, a professor of tax law at the USC Gould School of Law. 'I think a tax this high and this targeted raises some difficult questions, but at the end of the day, I would bet a constitutional challenge would not work.'

While the House passed the bill with a bipartisan 328-93 vote, according to Politico, 'The Senate vote won't be nearly as easy.' The bill's uncertain future in the Senate is subject to a group of senior Republicans who have vowed to obstruct its progress.

Obama issued a statement saying that the House measure 'rightly reflects the outrage' that the public feels over the bonuses. As to whether he may sign the bill into law, Obama has said only that he hopes to see a bill passed 'that will serve as a strong signal to the executives who run these firms that such compensation will not be tolerated.'

Full post as published by ACS Blog on March 20, 2009 (boomark / email).