[Congressional Record Volume 155, Number 48 (Thursday, March 19, 2009)]
[Senate]
[Pages S3563-S3564]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BAUCUS (for himself, Mr. Grassley, Mr. Wyden, Ms. Snowe, 
        Mrs. Lincoln, Mr. Kerry, Ms. Stabenow, Mr. Schumer, Mr. 
        Menendez, Mr. Nelson of Florida, Mr. Bingaman, and Ms. 
        Cantwell):
  S. 651. A bill to amend the Internal Revenue Code of 1986 to impose 
an excise tax on excessive bonuses paid by, and received from, 
companies receiving Federal emergency economic assistance, to limit the 
amount of nonqualified deferred compensation that employees of such 
companies may defer from taxation, and for other purposes; read the 
first time.
  Mr. BAUCUS. Mr. President, over the past week, we have heard a lot 
about AIG paying out $165 million in bonuses to employees of its 
financial products unit. This is the same company that took $170 
billion in taxpayer money just to stay afloat.
  The Government owns 80 percent of AIG. Yet some people in the 
Government say that they were not able to do anything to stop these 
bonuses from being paid.
  The country is angry, and I am angry.
  President Obama ordered Secretary Geithner to use all available legal 
means to recover these bonuses. But that may not be enough. We may 
never be able to recover these payments.
  The truth is we should not have to be in this position in the first 
place. When

[[Page S3564]]

we first passed the TARP funding, Senator Grassley and I fought hard to 
include strong provisions in the bill on executive compensation. 
Unfortunately, the TARP program was not run as originally intended.
  Even as we discuss this issue, reports are coming out that Fannie Mae 
and Freddie Mac are planning on paying retention bonuses to their 
executives.
  This type of behavior has to stop, and it has to stop now.
  Companies should not be taking taxpayer money for a bailout with one 
hand, and then paying out big bonuses with the other. Across the 
country, Americans are losing their jobs. They are stretching every 
dollar to cover the basic costs of living. Meanwhile, executives and 
employees at financial institutions are receiving big bonuses--bonuses 
that are being paid with taxpayer dollars.
  I think that almost all of us can agree that companies receiving 
taxpayer money should not be paying these big bonuses. Unfortunately, 
it seems that this type of behavior is not going stop, unless we take 
action. Using Congress's power to tax appears to be the best option 
available to us to address these excessive bonuses.
  So today, I join with my colleagues Senators Grassley, Wyden, and 
Snowe, as well as others, to introduce a bill to do just that.
  This bill makes sure that if a large institution receives government 
funds, and it then wants to pay out big bonuses, then it is going to 
face significant tax consequences. This bill would impose a 35 percent 
excise tax on each of the employer and the employee. It would apply to 
bonuses earned or paid after January 1 of this year.
  For retention bonuses, the excise tax would be imposed on the full 
amount of the bonus. For all other bonuses, the excise tax would be 
imposed on all amounts over $50,000. The bill includes regulatory 
safeguards that would help to prevent companies from characterizing 
bonus payments as salaries to avoid the taxes.
  This bill would also prevent companies from just deferring these 
bonuses to avoid paying this excise tax. This bill would prevent 
taxpayers from deferring more than $1 million in a 12 month period. If 
a taxpayer deferred more than $1 million, then the bill would impose a 
20 percent penalty and interest.
  Some have concerns about the small banks that want to take Federal 
money through the new SBA program that the President announced. Others 
have concerns about the larger banks that did not take much in TARP 
funds. The restrictions in this bill would not apply to small banks as 
defined in the tax code. And the restrictions would not apply to banks 
that receive less than $100 million of TARP funds or other Government 
assistance. And if those institutions wanted to pay back their TARP 
funds, they would no longer be subject to these restrictions.
  The way that these companies are doing business must stop. This bill 
would change the way that TARP recipients and recipients of other 
similar Government aid operate. These companies would no longer be able 
to pay out big bonuses or give out huge amounts of deferred 
compensation without facing significant tax consequences.
  The country is going through difficult times. Americans are scrimping 
and saving just to get by. We owe it to the American taxpayer to do all 
that we can to ensure that banks do not use taxpayer dollars to pay out 
big bonuses. I urge all of my Colleagues to join me in cosponsoring 
this important bill.
                                 ______