Recently the House of Representatives passed a bill that would require a tax of 90% on any bonus received by an employee whose household earns more than $250k per year.  This tax applies to any employee of any company that received at least $5 billion in federal aid via TARP.  This includes twelve of the largest companies in the United States and hundreds of thousands of employees.

The bill was in response to AIG giving retention bonuses that had been contractually agreed upon AFTER the United States provided “bailout” money to the insurer.  In fact, language in the bill explicitly allowed AIG to provide such retention bonuses to their employees.  The bonuses were given in an attempt to keep the company’s best employees on board while AIG tried to restructure to become a going concern.  The United States government believed that these bonuses were absolutely egregious, even though the United States government owned most of AIG when these bonuses were agreed upon between the company and the employees.

There are very serious problems associated with the United States essentially disregarding contract law and property rights by taxing these bonuses at a 90% rate, but there is another serious problem that is not as easily seen.  This new bill, should it pass the Senate, which it likely will with the help of President Obama, would make it so that no employee of these twelve gigantic, struggling corporations can ever receive a bonus that puts his/her household income over $250k.  As such, if a Citi secretary who is married to a successful surgeon makes $35,000 per year and is bonused $5,000 at the end of that year, she will have to pay a 90% tax on her $5,000 bonus.  This means that an overwhelming number of employees at these struggling corporations are likely to leave their posts for an occupation where they are entitled to more than 10% of their hard earned bonuses.  Those employees that stick around at these companies will likely be the people that will never have a chance of having a household income of over $250,000.  In other words, the employees with the most talent and capability of turning around these companies will leave said companies.

The United States government entered this “crisis” by stating that we, as tax-paying Americans, were to bailout out these giant corporations to “save” them because they were “too big to fail.”  True to form, our representatives have taken it upon themselves to wreck any chance of recovery for these companies by forcing any employee capable of “saving” these companies to leave.  This would be the equivalent of a baseball team telling its fans that it must increase ticket prices to improve the team, but they refuse to pay any player anything over $250k, and if that player’s wife makes an income then that income will be deducted from what the player will be paid.  The odds of such a baseball team improving are extremely limited — essentially zero.  This is the same ludicrous situation that our politicians have presented to us today.  They want to charge us money to save companies by effectively refusing to hire any capable employee.

Bravo, United States government, you have done it again.