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Friday, March 27, 2009
AIG Bonus Clawback Bill Meets Constitutional Resistance
By Ken Sweet
FOXBusiness
The bill to impose a 90% punitive tax on the executives at American International Group’s (AIG) Financial Products division, which passed the House by a large majority last week, might have hit a constitutional snag.
While some politicians said the bill stalled because last week’s boiling anger by the American public has simmered somewhat, there’s some underlying concern by constitutional experts and the White House that the bill might be flatly unconstitutional.
At the center of the constitutional debate is a clause in the U.S. Constitution, Article I, Section 9, that reads “no bill of attainder or ex post facto Law shall be passed” by Congress.
A bill of attainder is defined by FindLaw as a “legislative act that imposes any punishment on a named or implied individual or group without a trial.”
Bills of attainder have their origins in England, where a King would unilaterally issue laws with the approval of Parliament inflicting punishment on an individual or specific group of people. The writers of the Constitution despised the practice so much, they wrote it as one of eight acts that Congress is specifically banned from doing -- along with granting titles of nobility and the like.
The problem constitutionally with H.R. 1575 -- the official name of the AIG tax bill -- is the punitive tax on what amounts no more than 400 or so people, experts said.
While Congress aims taxes at particular groups of people all the time -- cigarette taxes being a good example -- there’s a concern that this group is too narrowly defined to be justified as an effective tax proposal.
“This is not a tax bill, this is vengeance,” said Judge Andrew Napolitano, FOX News’s Senior Judicial Analyst.
Even the White House has expressed similar concerns. In an interview with CBS’s “60 Minutes” last Sunday, President Barack Obama said “we can't govern out of anger” after the AIG bill passed.
Larry Tribe, a Harvard Law professor who is considered one of the nation’s premier scholars on constitutional law, said he believes H.R. 1575 could be ruled a bill of attainder.
Tribe said that while the Supreme Court has been hesitant to nullify any tax bill in previous cases -- ruling that Congress only needs a “minimally rational” reason for passing a tax -- the punitive nature of this tax bill might move it closer to unconstitutional grounds.
“The only way to now explain this bill’s purpose is to satisfy the public’s lust for punishment,” Tribe said.
There’s also the concern of the context of which the bill was passed. Tribe said that justices of the Supreme Court have shown a willingness to use the context surrounding the time a bill became law -- supplementary reports, Congressional debate, news and public comment -- to understand a bill’s true intent.
And with statements from members of Congress such as Sen. Chuck Grassley (R-Iowa), who said last week that AIG executives should “resign or go commit suicide,” Tribe said the Court could see that context as a valid reason to consider the bill not a tax bill, but a bill of attainder.
“The debate and news reports last week would cast a shadow on the bill if it became law,” Tribe said.
If the American public’s anger remains as hot as it was last week, Tribe said Congress could still try to claw back the $165 million in bonuses -- and do it constitutionally.
Currently the bill H.R. 1586 sitting in the House Judiciary Committee, which could claw back executive’s bonuses using bankruptcy law, would be constitutional because it inserts the judicial system back into decision making.
Tribe, who taught President Obama constitutional law when the future president was at Harvard Law, said he believes that if the Obama Administration does decide to pursue this action, it will use H.R. 1586.
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