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After-the-Fact AIG Tax: Un-American?


Are lawmakers abandoning Constitution to appease populist anger?

Think back to your high school government class and the time you studied the Constitution while thinking about that girl in the next row.

Article I, Section 9, Paragraph 3 of the US Constitution says, "No Bill of Attainder or ex post facto Law will be passed."

Isn't that exactly what the House of Representatives has done by voting 328-93 to impose a 90% surtax on the bonuses of executives at American International Group (AIG)?

The bill appears to be aimed at a specific group of people, and is retroactive to December 31, 2008. In short, the bill appears to be drafted to punish a small group of people who have incurred the wrath of the majority in the House.

In Federalist No. 44, James Madison wrote:

"Bills of attainder, ex post facto laws, and laws impairing the obligations of contracts, are contrary to the first principles of the social compact, and to every principle of sound legislation... The sober people of America are weary of the fluctuating policy which has directed the public councils. They have seen with regret and indignation that sudden changes and legislative interferences, in cases affecting personal rights, become jobs in the hands of enterprising and influential speculators, and snares to the more-industrious and less-informed part of the community."

That seems straightforward to freedom-loving schlubs everywhere, but the bill is artfully worded to include only those who earned more than $250,000 at companies that received at least $5 billion in government bailouts. That almost certainly means the bill also would apply the 8 banks that have received money through Uncle Sam's Troubled Asset Relief Program: Citigroup (C), JPMorgan Chase (JPM), Wells Fargo (WFC), Bank of America (BAC), Goldman Sachs (GS), Morgan Stanley (MS), PNC Financial Services Group (PNC) and US Bancorp (USB). But does broadening the bill to include the banks make it any less onerous than going after just AIG?

A quick Internet search shows that the courts have been reluctant to overturn what looks like after-the-fact tax legislation, but routinely turn thumbs down on bills that inflict special punishment on individuals, especially in criminal cases.

Watergate now seems as distant as the Peloponnesian War, but President Nixon lost a legal tiff along these lines. Congress passed a law stating that the infamous White House tapes revealing Nixon plotting the coverup that led to his impeachment should be in the "possession and control" of the United States. In a 7-2 decision, the US Supreme Court said the measure wasn't a bill of attainder because it didn't punish Nixon directly.

Someone is bound to argue that because the tax measure aimed at those rascally AIG executives applies only to income earned in 2009, it's not a retroactive tax - never mind that the measure was drafted after the bonuses were announced.
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