This is a short diary but I believe it is a novel solution to recover government monies that AIG intends to pay employees as bonuses. Instead of trying to stop AIG from paying the bonuses, let AIG pay them, but tax the bonuses that their employees receive at a 100% tax-rate.
AIG is making the argument that they are contractually obligated to pay retention bonuses to employees.
Without addressing the merits of this argument (I believe there is no merit) the issue is that employees of AIG, whose employer is receiving life-support from the federal government, should not be entitled to receive $170 million of tax-payer money to pay employees. It's Robin Hood in reverse, take tax money paid by the middle-class and redirect it to millionaire executives.
However, the federal government may have limited means to stop the bonuses. The initial agreement and legislation, signed when Bush was still president, between the federal government and AIG, may not have a provision to prevent these bonuses. President Obama has vowed to get the money back from these greedy bastards. (my words, not his) However, it may be a difficult to legally enforce.
Fine. Let AIG pay the bonuses but add a provision to the 2009 tax-law that taxes the bonuses at a 100% rate -- effectively returning the bonus money to the government. A crude version of this provision would look like this:
"Any individual who received a bonus of any kind, such as, but not limited to 'retention bonuses,' from a corporation or institution that received federal bailout funds {name the specific programs} shall be taxed at the 100% tax-rate on those bonuses."
The Internal Revenue Service is hereby authorized to draft regulations and create appropriate forms in order to implement this provision.