Thursday, March 19, 2009
What To Do About AIG
Today, Congress passed a law basically taxing back the bonuses that AIG gave to people even though they received taxpayer bailout money. While I understand that Americans want to see some justice, and believe me when I say I agree that these bonuses are completely inappropriate, I am not sure that this was the best way to go about this.
When I first heard about these bonus payments, I was as outraged as any other American. I could not understand how any company would agree to pay millions in bonus money to peole who basically ran the company into the ground. How is that fair? At first, I thought they needed to block the payments. But when it came out that they needed to pay it due to contractual law (I still question how this got into a contract) I relented since I do believe in the sanctity of contracts.
I then thought about this tax solution, and I liked it at first. Strange I know considering how much I hate the tax code but I really did want to see some fairness. But after I thought about it, I just do not like it. The precedence it sets is completely wrong. I do not like punitive tax laws. While I do believe it is justified here, I believe it can be used as one of those things that is extended to other, less warranted, situations.
So after thinking about it a little bit, I think the best way would be to just let it "slip" what the names are of the people who accepted the bonus. Give all of them a chance to pay it back (and some already have) and those that do not, simply reveal their name. Given the outrage that exists in America, I think the public could put a lot of pressure on these individuals to do the right thing. The stigma that would follow these people would be enormous. Any company that hired them would get tremendous negative press. Basically you shame these people into doing what they ought to do. It gets done what you want, and it does not do something that in my mind is just dangerous to do, fix problems through the tax code.