Monday, March 16, 2009

IRS: Challenge AIG Bonuses As Unreasonable

Larry Summers says that the United States government is powerless to stop the unreasonable AIG executive compensation. He should know better. Mr. Summers: Yes you can.

Treasury Secretary Tim Geithner should direct the Commissioner of Internal Revenue to challenge the AIG bonuses as unreasonable compensation under the Internal Revenue Code. Finding the AIG bonuses to be unreasonable compensation would render them nondeductible for federal tax purposes, and would strengthen potential shareholder derivative suits to recapture The Great AIG Giveaway.

~Aaron Zelinsky in the Huffington Post

HT: TaxProf

15 Comments:

At 3/16/2009 8:11 AM, Blogger KipEsquire said...

Wages & salaries above $1 million are already non-deductible as a business expense.

 
At 3/16/2009 8:35 AM, Anonymous Anonymous said...

... would strengthen potential shareholder derivative suits to recapture The Great AIG Giveaway.

The only people "capturing" wealth in this case will be the trial lawyers. Scum of the earth.

 
At 3/16/2009 12:20 PM, Anonymous Anonymous said...

From Rasmussen:

American workers are far more likely to belong to the investor class than a union. Just 9% of non-union workers would like to join a union.

Link

 
At 3/16/2009 2:19 PM, Blogger Boris said...

Hey, Mark

The outrage here is that the AIG top brass are being compensated based on contractual obligation, not on market status, company viability, or even performance. Of course people are angry that while the company is performing poorly the bosses are getting fat paychecks.

Where is the outrage about union contracts that mandate far-above-market wages while entire industries trudge uphill in this economy?

 
At 3/16/2009 2:36 PM, Blogger 1 said...

"The outrage here is that the AIG top brass are being compensated based on contractual obligation"...

Hmmm, so you like the Obama administration think that contracts aren't important, eh?

"Of course people are angry that while the company is performing poorly the bosses are getting fat paychecks"...

Which parts of AIG are performing poorly and which parts aren't?

Does New York Attorney General Andrew Cuomo even have a clue?

 
At 3/16/2009 4:03 PM, Blogger OA said...

Hard to be outraged over this when billions went out to AIG counterparties. Those guys would have gotten nothing in a bankruptcy so they should have been forced to take less in return for the Gov. keeping AIG afloat.

That is the true threat to viability, and the true reason the odds of getting paid back in full aren't so great.

Also just last week the omnibus spending bill with $8 billion in earmarks went through. The WH kept saying it's only 2% of the total so no big deal. Now $154 million is a travesty?

Time to stop screwing around with the deck chairs.

 
At 3/16/2009 4:10 PM, Blogger 1 said...

"Also just last week the omnibus spending bill with $8 billion in earmarks went through. The WH kept saying it's only 2% of the total so no big deal. Now $154 million is a travesty?"...

OA you might find the following from the Tax Rascal site worth a glance: Why Barney Frank’s Phony AIG Outrage is Worse Than the Bonuses

'If AIG’s structured products team is collecting these bonuses, it is, indeed, an outrage. But it’s much more likely that the bonus recipients aren’t the same team at all. AIG has a huge variety of insurance businesses, and it invests the proceeds from its insurance in an incredible array of assets. Even at a time like this, there are numerous AIG employees who are capable of making the company millions of dollars (and this would be a good time for them to have some extra money).

But think about those people: how happy would they be to work for AIG? If they got stock options for good work in past years, those options are worthless; if they invested their savings in AIG stock, their retirement account just blew up. It’s a wild guess, but I’d bet that the average AIG employee has lost far more (as a percentage of their net worth, and in absolute terms) than the average American worker
...

 
At 3/16/2009 10:41 PM, Anonymous Anonymous said...

If bankruptcy is a viable solution for GM to restructure its' labor agreements, so it should be for AIG as well.

 
At 3/16/2009 10:56 PM, Anonymous Anonymous said...

I tell you what. We'll make AIG give back the bonuses when congress gives back their pay raises.

Deal?

 
At 3/17/2009 8:58 AM, Anonymous Anonymous said...

If the recipients of these bonuses worked in the structured finance division of the company, then yes, they should be rescinded. Otherwise, this is stupidity squared.

AIG is only as valuable as it's people. Now that we own 80% of it, we should be making damn sure that talented people are rewarded. Instead, we are conducting a witch hunt, chasing good people away. I guess it's no surprise, the government always destroys value. They couldn't run the Mustang Ranch, what makes anyone believe they can run AIG?

 
At 3/17/2009 9:44 AM, Blogger VangelV said...

I think that the point is missed. Many of the people who are supposed to be paid bonuses were responsible for making profits for AIG. If the government had permitted AIG to put its derivative company into bankruptcy these people would still have received their bonuses because their companies would still be profitable.

This is a government issue once again. By saving the AIG counterparties and the AIG division that created the mess the government is punishing the vast majority of the employees who did their jobs well and performed to their contracts.

Had the Treasury and Fed let AIG go under this problem would have gone away for both the employees and the taxpayers.

 
At 3/17/2009 10:06 AM, Anonymous Anonymous said...

Where's the outrage over taxpayers subsidizing the ridiculous wages of union autoworkers? Shouldn't they have to take a major pay cut now that they're on the taxpayers dime?

 
At 3/17/2009 12:19 PM, Blogger jpm said...

It is not only illegal, it is highly unconscionable to suggest that the President instruct the IRS to single out a particular taxpayer and attack that taxpayer for conduct that is similar to actions taken by many others. It is no different from Obama telling the IRS to go after John McCain's deductions for those seven houses of his. Seems the left is now highly comfortable accepting government tyranny when it suits their needs. But remember--the Repubs will someday be back.

 
At 3/17/2009 12:20 PM, Blogger Boris said...

hey, 1

i think you misunderstood my point - outraged is ok. that's an emotion. you're free to have emotions. I'm with you on contracts - they're the basis of of our govt, and without them, we don't have a constitution. I am NOT ok with govt invalidating contracts for ANY reason. be it in housing, or corp payments - contracts are sacred.

my point is: there is no legal basis for action here. but for anyone that thinks that government should intervene, why not intervene in union compensation also?

 
At 3/17/2009 4:40 PM, Anonymous Anonymous said...

While the Senate was constructing the $787 billion stimulus last month, Dodd added an executive-compensation restriction to the bill. That amendment provides an ‘exception for contractually obligated bonuses agreed on before Feb. 11, 2009′ — which exempts the very AIG bonuses Dodd and others are now seeking to tax. . . . Separately, Sen. Dodd was AIG’s largest single recipient of campaign donations during the 2008 election cycle with $103,100, according to opensecrets.org.

Link

The modern Democrat party - the most corrupt party in the history of the republic.

 

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